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2020 TECH GUIDE Special Section • P. 27 November 2020

Why The Annuity Tide May Be Turning

PAGE 38

Annette Bau And The Millionaire Mindset

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THE YEAR THAT PUSHED ADVISORS INTO TECH PAGE 20


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IN THIS ISSUE 20 Ready Or Not

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» read it

NOVEMBER 2020 » VOLUME 13, NUMBER 11

HEALTH/BENEFITS

FEATURE

42 Could Reference-Based Pricing Be The Answer To High Group Costs?

By Steven A. Morelli COVID-19 forced many advisors to adopt technology, even if they were reluctant to do so. Here are stories of advisors who are making it work.

INFRONT

6 After A Year Of Reacting, NAIC Looks To 2021 Reset Of Focus By John Hilton State insurance regulators spent considerable time this year responding to the COVID-19 pandemic and racial strife that accompanied the Black Lives Matter movement. As the year draws to a close, regulators are setting a 2021 agenda filled with unresolved insurance issues.

INTERVIEW 10 The Millionaire Mindset

Annette Bau has made a career out of studying millionaires and how they think about money. In this interview with Publisher Paul Feldman, she reveals the secrets of thinking like a millionaire.

online

www.insurancenewsnetmagazine.com

By Kim Buckey This strategy requires a well-planned and well-executed rollout to avoid compliance, legal and employee relations problems.

ADVISORNEWS

46 COVID-19 Magnifies The Retirement Income Crisis

IN THE FIELD

By Eric Henderson Investors are frightened about the impact the pandemic will have on their retirement savings. How advisors can ease their fears.

14 On A Mission

By John Hilton The years Rod Furniss spent as a Mormon missionary in Argentina were great preparation for a career in insurance.

LIFE

32 For Young Adults, The Hardest Part Of Life Insurance Is Getting Started By Adam Winslow Help young adults get over their life insurance knowledge gap.

ANNUITY

INBALANCE

50 Don’t Let Emotional Overload Capsize Your Life By Susan Rupe Fear and anxiety can take over our lives if we don’t deal with those emotions correctly.

BUSINESS

38 W  hy The Annuity Tide May Be Turning

52 Valuating Your Practice: 2 Costly Mistakes To Avoid

By Tamiko Toland The SECURE Act could make consumers more receptive to annuities.

By Mike Walters The pandemic is pushing advisors to think more urgently about the value of their practices in preparation for an accelerated exit.

INSURANCENEWSNET.COM, INC.

275 Grandview Ave., Suite 100, Camp Hill, PA 17011 717.441.9357 www.InsuranceNewsNet.com PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli MANAGING EDITOR Susan Rupe SENIOR EDITOR John Hilton VP SALES Susan Chieca VP MARKETING Katie Frazier

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InsuranceNewsNet Magazine » November 2020


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WELCOME LETTER FROM THE EDITOR

Muddling Through The Middle

T

he fun part of the pandemic is over. There was a fun part? Yes, I understand that sounds insane. We all have been disrupted — many of us haven’t seen loved ones and friends in person, business is a bit more challenging, kids aren’t in the best learning environment (sometimes that might mean they are in your working environment) and of course there are the health effects of COVID-19, sometimes very dire effects. So, where’s the fun? Again, maybe fun is a little psycho to say, but perhaps it’s a little thrilling. I love the beginnings of movies and novels. For me, the exposition of characters and setting are the best part. That’s where the magic is in Stephen King’s books and Steven Spielberg’s movies. In the movie “ET,” perhaps the most compelling part was the depiction of a real family in all its loving chaos. I can leave a movie after the first act and be perfectly fine. Yeah, yeah, stuff will happen to these characters, but that’s the boring middle. That’s when you hit the restroom and concession stand. Then go back and wait to see how it ends. (Well, in the old days when we saw movies in theaters.) The beginning of the COVID-19 pandemic had all sorts of precedents that gave us a dopamine hit every time we picked up our phone. We all went into this altered state together. We all struggled with video. We all figured out remote working and selling. We all commiserated about the struggles. Now we are in the boring middle of the pandemic. Or to put it more palatably, we are in the recovery stage. That is how Catherine Hernandez-Blades, a senior vice president at Aflac, described the three Rs of our collective journey through this crisis: reaction, recovery and reinvention. She offered this perspective during the American Council of Life Insurers’ virtual annual conference in October. The response period is full of adrenaline and everybody knows what they are marching for. “Recovery is what I’ll call what we’re going through now,” Hernandez-Blades said. “And that’s the slog. That is the getting used to the new normal that is trying to 4

be productive, when you’re absolutely exhausted, and you’re still trying to get the job done.”

The Boring Middle

Fittingly, this is the middle of this letter, the part you scan to see how it ends — “Will Steve bring the end back to the beginning? Let’s go see!” Here’s the thing: This is where life happens. This is where we can get lost. This is the vast continent of Wegmans between the produce and the freezers, where your family wanders off and you’re on your own wondering if you really need this red vegetable peeler. This is where you learn to put down the peeler, find the important stuff, and gather your family to make it to the registers safe and sound. Maybe not sound. “You have to make it through this slog of the recovery period so that you can set yourself up for a very successful reinvention,” Hernandez-Blades said. “That is the nature of how I think businesses should be looking at crises.” People who have a hard time with focus have a difficult time in this amorphous middle. Organizational skills and good habits play a part, but mindset has to come first. That was part of Annette Bau’s message in this month’s interview with Paul Feldman. Bau started in the financial advising business and quickly ran into the deep mud. She was finding little success and heard nothing but negativity about her chances to succeed. She spent enormous energy and attention on an unsupportive manager and work environment until one day she decided to redirect that energy. Bau instead turned all that energy to her clients. After a while, she racked up successes that led to bigger successes. This is the part of the story where our hero meets seemingly unsurmountable hurdles and, after some struggle, clears them. Bau used a talisman of a sort, a grid that she describes in the interview with Paul Feldman. It is not a grid that you might imagine would incorporate the total span of failure and success. She uses the grid as a stand-in for that sucky middle. Below the grid is level one where people are scared. They bully and blame others,

InsuranceNewsNet Magazine » November 2020

and live in a pessimistic and negative state. The grid itself is level two, where people know what they should do, but they are not doing it consistently or not doing it at all; they are living in a volatile state, pinging from highs to lows and back. Above the grid is level three, where people know peace, joy and clarity, and live in a positive state of optimism. Although the scale seems to range from worst to best, Bau says the middle is actually where people are at the worst stage. “I actually think people at the grid are more dangerous than those who are above or below,” Bau said. The middle area has the vantage point of seeing the right action but not doing it. So it is failure wrapped in self-loathing and resentment. This is where most of us live, quite frankly. As someone muddling through the middle, I can tell you that I have often relied on a tip that Plato offered Aristotle. The lesson is that when looking at the wide spectrum between cowardice and bravery, you don’t want to be near either extreme. A coward gets nothing done, and fearless people tend to meet an early end. The key to being brave is doing brave things. Seems simple to say, but choosing the brave option in the next choice is stepping toward bravery. Each step gets a little closer, until we are in the middle zone between bravery and cowardice.

The Triumphant Third Act

We are looking forward to this phase of the pandemic, when an effective vaccine and treatments are widespread, and people can be with others again safely. The economy might bounce back to new heights, and we will absorb the lessons we learned during the plague. We dream of a happy ending. That all depends on whether we do the right things in this middle period to make that possible, and also to get ourselves on that express train to better days. Movies where things just magically resolve themselves are unsatisfying. Happy endings must be earned. Steven A. Morelli Editor-in-Chief


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INFRONT

After A Year Of Reacting, NAIC Looks To 2021 Reset Of Focus State insurance regulators spent considerable time this year responding to the COVID-19 pandemic and racial strife that accompanied the Black Lives Matter movement. As the year draws to a close, regulators are setting a 2021 agenda filled with unresolved insurance issues. By John Hilton

S

tate insurance regulators are not known for working fast — but that is changing. The National Association of Insurance Commissioners continues to respond quickly to the rapidly changing landscape insurers are living in by adapting rules and regulations amid the extended pandemic. It is a theme expected to dominate their 2021 regulatory calendar as well. “Outstanding,” said Susan Neely, president and CEO of the American Council of Life Insurers, of the response from regulators. “We can’t say enough about how responsive they were to our requests for regulatory accommodations that allowed life insurers to continue to serve their customers and keep operating.” This year was filled with unexpected issues and emergencies that touched the 6

insurance industry in several ways. First, the COVID-19 pandemic spurred an economic crisis that saw already low interest rates plunge to historic lows. That was followed by the May 25 death of George Floyd in Minneapolis police custody. The insurance industry responded with a campaign for racial diversity, and NAIC regulators devoted considerable time to the effort. In the meantime, work continued briskly as technical changes to rules brought insurers relief. Most recently, the Life Actuarial Task Force dropped the nonforfeiture rate from 1% to 0.15% — a technical change that has big financial implications for insurers and their annuity obligations. Nonforfeiture means the amount an insurer must pay a consumer who surrenders a cash value policy or any policy with such a nonforfeiture benefit. The benefit is based in part on an interest rate to reflect earnings on policyholders’ money. With interest rates at historic lows and insurers suffering pandemic-related financial losses, executives have pleaded with regulators to drop the nonforfeiture rate to 0%. Regulators didn’t want to go that far but showed a willingness to help companies navigate troubled economic times. “Nobody could imagine this interest rate environment,” said Rhonda

InsuranceNewsNet Magazine » November 2020

Ahrens, chief actuary of the Nebraska Department of Insurance. “If this continues this way and companies stay in longer and don’t pull products because they think they can make it a little while longer with a 1% minimum, will we have solvency concerns?” Mona Bhalla, deputy superintendent for life insurance in New York, was not convinced consumers are best served by the change. “I don’t believe it strikes the right balance between those concerns and consumers’ interest, particularly given that consumers would be depositing a significant amount of premium and not be able to take that premium out without being subjected to very large surrender charges and earn basically nothing on that money,” she said. Fred Anderson, deputy commissioner of insurance for Minnesota, noted that having a floor does not prevent insurers from competing in the free market. “I think we’ve seen that the annuity market is fairly competitive at the current time,” he said. “And if the environment is ripe for guarantees in excess of whatever ends up being the minimum being offered, I think companies will be willing to offer those products.” The rate change moves on to the Life and Annuity Committee for consideration.


AFTER A YEAR OF REACTING, NAIC LOOKS TO 2021 RESET OF FOCUS

2021 Regulatory Calendar

The Life Actuarial Task Force met recently to set its regulatory goals, or charges, for 2021. The task force covers many issues of high importance to the industry — illustration guidelines, for example.

illustration model was a very lengthy, acrimonious process that took years before the NAIC adopted it in 1995. Recognition of longevity risk. The Longevity Risk Subgroup will provide recommendations for recognizing lon-

“If this continues this way and companies stay in longer and don’t pull products because they think they can make it a little while longer with a 1% minimum, will we have solvency concerns?” Rhonda Ahrens, chief actuary of the Nebraska Department of Insurance

A new charge was added and a contract awarded to Conning to provide “economic scenario generator” services. The data Conning generates will be used for regulatory reserve and capital calculations, regulators said. “Conning’s ESG tool uses advanced modeling and estimation technology to produce empirically validated, realistic economic behavior, and its financial models are among the industry’s most technologically advanced,” the NAIC said in a news release. Other charges the task force approved last month include: Monitor Actuarial Guideline 49A. Approved by the NAIC Executive Committee in August, the amended AG 49 is meant to prevent designs with multipliers or other enhancements from illustrating better returns than those of non-multiplier designs. Also, the new AG 49A restricts the IUL illustration crediting rate to a limit of 50 basis points higher than the policy loan rate. The task force changed the effective date of the new AG 49A guidelines to Dec. 14 to reflect schedules delayed by COVID-19. Recommendations to improve life insurance illustration regulation. The task force charged the IUL Illustration Subgroup with recommending changes to Life Insurance Illustrations Model Regulation (No. 582). Producing the overall life insurance

gevity risk in statutory reserves and/or risk-based capital by the 2021 Summer National Meeting. Study accelerated underwriting. The task force itself vowed to “provide recommendations for guidance and requirements for accelerated underwriting.” Regulators will focus on an actuarial perspective.

INFRONT

adopted in February. Since then, Arizona and Iowa have adopted the rules, which establish a best-interest standard that aligns with rules being considered by other agencies. Industry representatives predicted swift adoption of the rule in many states and promised aggressive lobbying to nudge others to pass the rules. So far, that hasn’t happened. To nudge things along, NAIC regulators decided to produce a FAQs document to send to the states. Comments were accepted on the document until early October. The working group is expected to spend much of 2021 getting the FAQs out to state officials and pushing for universal adoption of the best-interest rules. The annuity sales model articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation. The new regulations will commit the agent to extra work and documentation to establish the consumer’s profile. Agents will need to find out and document things like a consumer’s financial situation, insurance needs and financial objectives.

“If the environment is ripe for guarantees in excess of whatever ends up being the minimum being offered, I think companies will be willing to offer those products” Fred Anderson, deputy commissioner of insurance for Minnesota Other NAIC groups, in particular the Accelerated Underwriting Working Group, have been focused on accelerated underwriting. Insurers are especially interested in creative underwriting solutions because of the pandemic restricting face-to-face meetings.

The rule specifically does not establish a fiduciary duty, nor does it ban agents from recommending products with a higher compensation structure. But the agent must be able to show that such a recommendation is in the consumer’s best interest.

Annuity Sales Rules

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

Although regulators finished work early in 2020 on a new best-interest model law for annuity sales, more follow-up is needed. Revisions to the suitability in annuity transactions (No. 275) model law were

November 2020 » InsuranceNewsNet Magazine

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INTERVIEW

ANNETTE BAU

says advisors must do a deep dive into themselves before rising to the top of success. 10

InsuranceNewsNet Magazine Âť November 2020


THE MILLIONAIRE MINDSET INTERVIEW

M

ost people would agree that there is a formula for success. But would they also admit that there is a formula for failure? Annette Bau is an advisor to advisors. After 30 years of observing, researching, writing and teaching, she says any success starts with a plan. Failure does, too. If you are choosing low-value activities and living in a short-term world, that is where you will stay. A Shangri-La will not just appear one day and open its doors. Bau (pronounced bah-hoo) distinguishes herself as The Millionaire Insider, but she did not start life in riches. She is based in Arizona now, but she grew up blue collar in South Dakota. Bau was waitressing while in high school when she became fascinated with wealthy people she saw and pointed her future in that direction. As she became a financial advisor, she wanted to know more about serving the wealthy market and eventually developed her Millionaire Insider program to help other advisors reach high-networth clients. Bau is also interested in helping people live satisfying lives — and she stresses that success is not just financial success. Balance is key to enjoying the wealth that is being created. Otherwise, dollars have no real value. After years of believing that simply having money was all she needed (and she had plenty of hungry years when that was all she thought about), she realized that an amazing life requires success in a variety of areas. In this interview with Publisher Paul Feldman, Bau discusses how to change your mindset and become comfortable with millionaires — and attract their business.

in high school. I had to work. And I would always meet these millionaires that would come into the restaurant. Because I lived in a small town in South Dakota, I lived vicariously through them. I just could not wait until I could live their life, because I just figured once I had money, everything would be great. Fortunately, one of the millionaires hired me to do research. In the process of that, I learned so much about how they think. That’s when I really began my research, because this millionaire was brilliant when it came to business, but he had a horrific personal life. He was a serious alcoholic. In South Dakota, if you had your driver’s license taken away from you, you

no guarantee on the downside, but an unlimited upside. And I was so excited. Six months later, the manager comes to me and he says, “You know, Annette, you’re young, you’re attractive, and you’re a female. I can’t let you be your own agent. You don’t have what it takes. You’ll never make it.” It was just devastating. And then he made me go work with the only other minority in the office, who had a lower opinion of women. It was really hard. So, I quit there, and I was so angry. I was so mad, because I’m thinking this is my ticket out of blue collar. While there is nothing wrong with blue collar, it was more the mentality of always struggling financially.

What I frequently find with advisors is that many of them are doing a lot of the execution, but they haven’t taken the time to do the strategy, meaning creating the plan, or developing a solid foundation.

FELDMAN: How did you get into the business, and how has your career evolved over the years? BAU: I come from basically just a blue-collar family. My father had an eighth-grade education. I was a waitress

were a serious alcoholic, because normally the police would find you drunk and they’d say, “Go home.” He would always have a driver when he would come in. I learned that I wanted to have money, but I also wanted to have a really good life. So, I go to college at Colorado State, and then I came to ASU [Arizona State University]. In my senior year, I’m like, “I’ve got to figure out what job I’m going to do to make money.” I went to a career counselor, who gave me the options: I could be a commercial Realtor, residential Realtor, insurance agent or financial advisor. And her husband just happened to work with MetLife. In learning more about financial services, I’m like, “That’s what I want to do.” FELDMAN: How did you get into the industry? BAU: A major financial firm came to our college campus. I did an interview with them, and they hired me. So, I was able to do an internship, with the agreement that at the end of six months I would be able to be my own agent. That meant I’d have

But the only person who gets to decide if we make it is us. It’s important to state that no one, not your manager, not your spouse, only you. FELDMAN: How did you turn that around? BAU: One day I woke up. I said, “I’m spending so much negative energy on this. If I just started focusing on helping my clients and doing good, good things have to happen.” Four years later, I got my first major deal, which was just under $1 million in my pocket. That manager who said, “You don’t have what it takes. You’ll never make it,” had been trying to get that client for over a decade. And I’m convinced if I would not have gotten out of that energy and been focused on doing good and helping people, I don’t think that would ever have happened. That’s how I got into the business. Then one of my mentors said, and everyone hears this, “You make what your average five friends are.” And I thought, well, I wonder if the same is true of the

November 2020 » InsuranceNewsNet Magazine

11


INTERVIEW THE MILLIONAIRE MINDSET

The Worth Barometer Grid Above the Grid (Level 3)

etc. Love, peace, joy, clarity, responsibility, peace of mind, Emotional State: Optimistic & positive

= =========== THE GRID (Level 2) ========= Understand it but are not living it. Emotional State: Vacillates up & down

Below the Grid (Level 1)

of Fear, anger, worry, blame, gossip, victim or bully, lack accountability, ownership, responsibility, etc. Emotional State: Pessimistic & negative ™

clients I work with, like my new worth will be theirs if I work with them. The rest is kind of history. I started working with really wealthy clients and doing research in addition to advising clients. I just want to say anything’s possible. It’s been an exciting journey. FELDMAN: In working with advisors, you’ve developed a success formula that has many different components. Can you share that with our readers? BAU: One of the things I’ve found in advising millionaires and researching them is that everything in life has a formula. If you think about it, somebody earning $50,000 has one formula; somebody earning $500,000 has another one; somebody earning $5 million, another one. There’s a formula to become financially free. There’s a formula to become a multimillionaire. And once I understood that, everything changed. The formula I figured out has three components. It’s your foundation, which is your inner game. It’s where you get the clarity of what you want, your mindset, your vision and your worth. 12

Then you have your strategy. That’s your inside game plan. It’s who you serve and learn about, researching how you’re going to attract them. When it comes to your financial freedom, it would be the plan you create. And then the execution, which is your outer game. That’s about the action that you’re consistently taking. What I frequently find with advisors is that many of them are doing a lot of the execution, but they haven’t taken the time to do the strategy, meaning creating the plan or developing a solid foundation. If you can combine all three, that’s where you have the perfect, magical formula. FELDMAN: How do you set yourself up to focus on a strategy? Because we’re all so busy doing it, doing it, doing it that we often neglect developing and redeveloping our overall strategy. BAU: The first thing you have to get clear about is what do you want and what you are accomplishing. And most people think, “Oh, yeah, yeah.” But when you dive down and talk to a person, most people are not clear on what they really want. They know what they don’t want, but you must get clear on what you do want.

InsuranceNewsNet Magazine » November 2020

Then you have to figure out the path to get there. So, once you know what it is, then execution becomes a lot easier. The problem with most people is they just start executing and they’re not clear on what they want or the strategy to get there. That’s where it can become ineffective. Then you’re not getting your result, which leads you to this tailspin of saying, “You know, this isn’t working. I don’t know what’s wrong.” And on and on. That’s why creating a plan is important. Most advisors are so busy trying to get deals that if they would just slow down a little bit, create a plan, get really clear on it and then execute, they would see their results skyrocket. FELDMAN: One of the things you talk about, which I think goes hand in hand here, is the worth barometer. How is that important to an advisor? BAU: I’ve found it to be the No. 1 indicator of success. It’s your beliefs and your self-worth, your self-esteem, your self-confidence. I’ve been advising and researching millionaires for over 30 years, and now researching advisors in my Mastermind.


THE MILLIONAIRE MINDSET INTERVIEW Now this is really interesting. You can have a low worth barometer and still be making money or getting results. But what you’ll typically see with somebody who has a low worth barometer is they have good results and then it goes back down. That means they’re on a roller coaster — it’s good, and then it’s bad. And they never have peace of mind. So, if you want to have money and an amazing life where you’ve got peace of mind and you’re loving what’s going on, you have to elevate your worth barometer. FELDMAN: How does the worth barometer work? BAU: We measure the worth barometer on a grid. Above the grid is a higher vibration. And I know that sounds really woo-woo, but you’ll find people that operate “above the grid,” they’ve got more peace of mind. They’re calmer. They’re focused on a win-win. They’re accountable. They’re responsible. They do what they need to do to get results. And then you’ve got people that are “at the grid” that conceptually understand it, but they rationalize or justify their actions. I actually think people at the grid are more dangerous than those who are above or below. Below the grid is where it’s a win-lose, like a bully or a victim. Either I’m going to win and you’re going to lose, or I’m going to lose and you’re going to win. They lack ownership and personal responsibility. They’re always blaming someone else. The problem with somebody below the grid is that they don’t do the things they need to do to get the results they want. So, it’s just a vicious cycle. But one thing I will say about people who operate below the grid, and I’ve been studying this for a very long time, is that most people don’t even know there was a grid. I didn’t know for the first 30-some years of my life. And once you understand that there is, then you start making little tweaks. You understand what triggers you, how you can get back on track, how you can see a bigger picture than what you’ve been seeing, and everything changes. And don’t be hard on yourself. Sometimes the grid can trigger people, and so I encourage you to look at what sends you below the grid. It’s also import-

ant to know that no one’s always above the grid, believe me. I used to get below the grid when people would cut me off in traffic. And I finally realized, I just hope they get where they’re going and they don’t kill somebody in the process. But it’s just shifting those instances where we go below the grid. The ultimate issue with the grid is that you attract people wherever you are spending your time. So, most people don’t want clients who are not accountable, who don’t follow instructions, who miss appointments. Those people are all below the grid. We want to attract people who really value what we’re doing. Those people are above the grid. FELDMAN: How do millionaires think differently than others? BAU: One of the most important things when it comes to millionaires is their values. Something that I’m seeing a lot now — especially with affluent women who now control the wealth and have a lot to say in what’s going on in their finances, more so than I’ve ever seen it in my entire career — is that we must understand that just as we see the world one way, so do they. And the more we can take the time to ask the questions, find out what they value, find out how we can support them, the more successful we’re going to be. One of the things that I find fascinating is that a lot of advisors think, “Well I can’t work with somebody who has money, because I don’t have money.” When I first started working with millionaires, I had no money, and I actually don’t think it’s a problem at all. You’re going to find some millionaires who are jerks, and you’re going to find some who really want your service. Just like in any market. What you have to understand is that you must have the confidence to be able to tell them what they need to do and not succumb to what you think they want. What I found so fascinating about my millionaire clients, and I still do, is that what they love about me is that I don’t simply agree with them. If I don’t think they’re making the right decision, they’re going to hear it from me. There are a lot of dynamics. But the

issue is that you must get in the arena. Most people are looking in from outside the arena, and they don’t get it. I just interviewed one of our Mastermind members, who increased his revenue by 72% last year. When I had a conversation with him right before he joined our Mastermind, I said, “Why aren’t you working with millionaires?” He said, “Oh, I don’t work with millionaires. I don’t come from money, and I just don’t deal with those types of people.” Well, now he’s got four millionaire clients and he’s got $1.5 million in the pipeline. And he says, “What I realized is you can’t chase after them. You have to provide them value, find out what matters with them and get them to come to you.” And now he’s like, “Oh, I had no idea they’d be so easy to work with.” But those are the beliefs that keep us stuck and keep us from achieving our goal. FELDMAN: I’ve found some people have self-limiting beliefs. And they think, “I can’t work with wealthy people because I don’t have wealth or I didn’t come from it.” You have to connect before you do business with them. BAU: And one of the things is that people who truly have money aren’t the ones who are flaunting it and making you think they have money. There was some big YouTuber that was just called out because all his videos are in this multimillion-dollar home with this really expensive car. And it turns out he lives in his parents’ basement. And I thought, “That’s the problem. Everyone wants to look like they have money.” We’re paid a lot of money to think and to give people recommendations. But if we can integrate our head and our heart, that emotional connection, that’s where the magic occurs, and that’s where we really can see exponential growths in our business. So, that’s absolutely huge.

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November 2020 » InsuranceNewsNet Magazine

13


the Fıeld

A Visit With Agents of Change

ON A MISSION

How Rod Furniss went from a farmer to missionary to insurance agent to a legislator to serve a greater good. • BY JOH N H I LTON •

M

ormon missionaries spend two years in a daily struggle against tremendous odds to win converts to the faith. Those who complete their missions learn to communicate better, be persistent, accept rejection and live a disciplined life. Luckily for Rod Furniss, those lessons learned during his Argentina mission could not have prepared him better for a career in insurance. “Everyone I talked to said I was crazy to 14

go into the insurance business,” Furniss recalled. “To prove them wrong, the first year I worked four nights a week and I promised my wife I would wean myself down, and each year I worked less.” Furniss, 60, spends little time on insurance agency matters these days. He has moved into politics and is serving his first term in the Idaho House of Representatives, where he helped push tough rules on annuity sales through a heavily conservative legislature. Most significantly, the bill requires all indexed annuity advertising to be pre-ap-

InsuranceNewsNet Magazine » November 2020

proved by the Department of Insurance. That measure caused some heartburn for companies, Insurance Commissioner Dean Cameron told colleagues this summer. The rules took effect July 1. “We were seeing some abuses in the sales industry,” Furniss said. Although he is a stalwart conservative proud of Idaho’s lack of regulation, Furniss biggest accomplishments during his first term helped expand government oversight. In addition to the annuity bill, he sponsored a bill requiring self-funded health insurance plans to register with the state, and another bill to require vehicle owners to prove they have a registration before they can get insurance. “While those bills appear to expand government, the monetary savings from each bill actually made business sense for both the state of Idaho and the constituents,” Furniss said. “I call those bills good commonsense business bills. A win-win for Idaho.” Being a lifelong insurance agent brings a great perspective to the legislature, said Hyatt Erstad, president of Erstad and Co., a Boise-based insurance and employee benefits firm. “He’s done a really good job,” Erstad said. “I think his background in the insurance industry has helped him be very proactive in the legislature.”

Working The Farm

Furniss was born and raised in Menan, a small town of about 750 residents, tucked into the southeast corner of lower Idaho. It was and remains pure country living. “I lived five miles from any town,” he said. Growing up on a remote farm meant a lot of things for teenage Rod Furniss: long workdays carrying buckets of grain for the pigs, tending to up to 2,000 cows and riding horses over hundreds of acres. It also turned out to be great training for a future insurance agent. Furniss learned how to work hard and how to work largely by himself. He received lessons in self-sufficiency and perseverance that would later translate to a young agent working tirelessly to build a book of business. The farming life is about putting in a lot of work toward a reward that comes much later in the form of taking crops to market. A star quarterback on his high school football team, Furniss went on to play


ON A MISSION IN THE FIELD

where neighbors rely on one another. “Reputation does help in Idaho,” Furniss said. “We may be small town, but we’re big potatoes. We have the largest millionaires per capita in the nation. And you can do really well in a small town if you’ll just get out and be part of the community.”

‘People Respond Quite Well’

Rod Furniss, right, grew up working on a large farm, which he credits for his strong work ethic.

one year for Brigham Young University. Just to go to college was a huge step for Furniss — nobody in his family had done so previously. Like many BYU students, Furniss embraced the challenge of a twoyear Mormon mission, accepting an assignment to Buenos Aires. “It’s quite a life,” Furniss recalled. “But at the end of the day, it’s a character-building experience that helps you communicate with people and understand their needs. We saw a lot of families that were both good families and broken families. It helps you determine what kind of family you want later in life.”

Banking On A Future

After graduating with a degree in business administration and finance, Furniss was hired as a management trainee by a bank. But after one year, he was asked to move to another part of Idaho and he hesitated to leave his family. Then fate intervened and made the decision easier. “Northwestern Mutual Life recruited me as a commissioned salesperson, and that’s probably the best decision I’ve ever made,” Furniss said. “They had a great

training program that mentored me. And I was extremely successful.” Furniss would build his career at Northwestern Mutual over 25 years. His strategy was simple: meet as many people as possible and work hard. Starting out working four nights a week, he eventually dropped to three and then two. For many additional years, Furniss maintained one night of office hours. The beginning years are the hardest for any insurance agent. Furniss kept pushing on, determined to build a career one client at a time. “A lot of work and gut checking goes on during that time in the insurance world,” Furniss said. “I trained insurance agents after a while and I ran a college unit. I would always tell them, ‘If you’re going to go into this business, you need six months of savings and a lot of hard work.’ It’s not just show up. You’ve got to fight to see people and that’s what you do every day.” The uniquely Idahoan culture benefited him along the way. Home to 1.8 million residents, Idaho is largely rural and conservative, and a heavily farm-reliant state

Furniss certainly did that. He is past president of the Idaho chapter of the National Association of Insurance and Financial Advisors, the Society of Financial Professionals and other organizations. He also qualified for the Million Dollar Roundtable and the Top of the Table. Church work and charities such as the Boy Scouts fill free time as well. It’s not necessarily about looking to sell but, instead, recognizing where friends and neighbors might need your services, Furniss explained. “Very few people asked you to sell them life insurance,” he noted. “That’s just not something they do. So you’ve got to be bold enough at the end of the day to say, ‘I’d like to review your life insurance in case something were to happen to you.’ People respond to that quite well and appreciate the fact that you’re willing to help their families and their businesses.” Of course, there are days when being their insurance agent is a welcome relationship. One client in particular had a small child who died. The policy that covered the child was a very small one, costing perhaps $20 a month, but Furniss was able to deliver a large check to the family after the unexpected death. That money supported the parents financially and they adopted more children. “I followed that family and watched those children grow up and become prominent people in the community,” Furniss said. Anchoring his main office in Idaho Falls, population 63,000, Furniss married his wife, Jan, right after college. They have five children — four daughters and a son. A career in life insurance also lends itself to having a large family, Furniss said. “I’ve been able to coach all my children in soccer, basketball, football. I’ve never missed a game,” he said. “I’ve been able to attend every event. I’ve always been my own boss. I just don’t think people realize that if they step out just a little bit, they can have that time off later.”

November 2020 » InsuranceNewsNet Magazine

15


the Fıeld

A Visit With Agents of Change

A first-term legislator, Rep. Rod Furniss, R, has had a handful of successful bills make it to Gov. Brad Little’s desk.

Hello, Politics

After 25 years with Northwestern Mutual, Furniss moved to Prudential for two years before cutting all ties and becoming a fully independent agent. Today, his business book is dominated by group and individual health insurance policyholders, but he retains about 2,000 individual life insurance clients. He has a second office in Rexburg, Idaho, and offers financial planning, and has even branched out into property development. Two sons-in-law help run aspects of the Furniss family businesses. A lifelong Republican, Furniss became active in the state GOP when a committee seat opened up. Or so he thought. It turns out it was not a vacant seat at all, but Furniss had challenged a sitting committee member. “I left my name on the ballot just to see if I got elected and I won that election,” he said. “I didn’t campaign. I just put my name out there and then I was elected.” After a few years on the Republican Central Committee, Furniss was asked to run for the state House of Representatives in 2018. “I’ve always been a ‘yes’ person,” Furniss 16

said. “Every time someone asks me to serve, I always try to step up and help as much as I can. I probably need to learn to say ‘no’ just a little bit more.” In a tight primary race, Furniss bested incumbent Karey Hanks, 4,271-4,004. He breezed to a general election win, and again in the primary this year, winning nearly 69% of the Republican vote. The annuity sales bill came about fairly quickly earlier this year. Furniss introduced the bill on Feb. 20 and Gov. Brad Little signed it on March 20. Furniss said he “is not opposed” to indexed annuities, but most likely would redirect a client to a variable or fixed annuity. The penalties make indexed annuities difficult to recommend, he said. There were also concerns over advertising promising unrealistic returns, he added. “We were seeing some return on investments that weren’t much better than fixed annuities,” Furniss said. “A lot of the people had expectations that they would get an 8% or 9% rate of return, when in reality they were getting a 1% to 3% or a 1% to 4% return.” In addition, the bill introduces new annuity sale disclosures and timelines for delivery of those documents. It also limits surrender periods to 10-year maximum, and bans annuities with surrender charges that exceed 10% in the first year and decrease by 1% per year. “We were starting to see some contracts that have extended surrender charges in them, and people probably weren’t understanding the different caps and things that were available to them,” Furniss said. For now, it’s campaign season and Furniss is a huge favorite to win a second term. His website espouses conservative positions — traditional marriage and Second Amendment gun rights, for example — and Furniss doesn’t plan to end his political career anytime soon. “As long as I can continue to be useful in the legislature,” he said, “I’m probably going to continue to run for office.” InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback. com. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Magazine » November 2020

Insurance products issued by MINNESOTA LIFE INSURANCE COMPANY. Insurance policy guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender periods. Agreements may be subject to additional costs and restrictions. Agreements may not be available in all states or may exist under a different name in various states and may not be available in combination with other agreements. SecureCare may not be available in all states. Product features, including limitations and exclusions, may vary by state. SecureCare Universal Life Insurance includes the Acceleration for Long-Term Care Agreement. The Acceleration for Long-Term Care Agreement is a tax qualified long-term care agreement that covers care such as nursing care, home- and communitybased care, and informal care as defined in the agreement. This agreement provides for the payment of a monthly benefit for qualified long-term care services. This agreement is intended to provide federally tax qualified long-term care insurance benefits under Section 7702B of the Internal Revenue Code, as amended. However, due to uncertainty in the tax law, benefits paid under this agreement may be taxable. Please ensure that your clients consult a tax advisor regarding long-term care benefit payments, or when taking a loan or withdrawal from a life insurance contract. The death proceeds will be reduced by a long-term care or terminal illness benefit payment under this policy. This policy has exclusions, limitations and reduction of benefits, under which the policy may be continued in force or discontinued. For costs and complete details of the coverage, call or write your producer or Minnesota Life Insurance Company. These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affiliates, have a financial interest in the sale of their products. The purpose of this material is the solicitation of insurance. An insurance agent or company may contact you. Policy form numbers: ICC17-20103, 17-20103 and any state variations; ICC17-20111, 17-20111 and any state variations. Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues. Securian Financial is the marketing name for Securian Financial Group, Inc., and its affiliates. Minnesota Life Insurance Company and Securian Life Insurance Company are affiliates of Securian Financial Group, Inc. For financial professional use only. Not for use with the public. This material may not be reproduced in any way where it would be accessible to the general public.

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NEWSWIRES Median Household Wealth

Wealth, Disparity Grew Sharply Since 2016, Fed Says

White families - $188,000 Hispanic families - $36,200 Black families - $24,100

SOURCE: Federal Reserve

We hear and read so much about how the economy was on a roll before the COVID19 pandemic ran it off a cliff. But Federal Reserve data shows that maybe that preCOVID-19 economy wasn’t so great for everyone. American families’ savings increased strongly between 2016 and 2019, but wealth inequality remained stubbornly high, according to the Fed. Median net worth climbed by 18% in those three years, the Fed’s Survey of Consumer Finances showed, as median family income increased by 5%. The survey found that, from 2016 to 2019, income for the typical U.S. family rose 5%, adjusted for inflation, to $58,600. Black and Hispanic households reported sharper gains in wealth than white households did, those increases weren’t enough to noticeably narrow the racial gaps. The typical white family possessed eight times the wealth of Black families and five times the wealth of Hispanic families in 2019, the Fed said. The median family income for whites grew 6%. For Black households, it was slightly better at 7%. For Hispanic families, income fell 1%. Median income for white families last year was $69,000, compared with $40,300 for Black families and $40,700 for Hispanics. The Fed report showed the share of wealth owned by the top 1% of households was still near a 30-year high. The richest one-tenth of families owned 71% of the nation’s wealth, a percentage unchanged from 2016.

84% SAY COVID-19 WILL HURT THEIR FINANCIAL SECURITY

American adults say COVID-19 and the resulting financial downturn will hurt them financially, but most are confident that a robust recovery is on the horizon. That’s from the Northwestern Mutual 2020 Planning & Progress Study. More than eight in 10 (84%) adults said the pandemic and financial crisis will have an impact on their ability to achieve long-term financial security. Nearly six in 10 Americans are reeval(59%) said that imuating expenses during pact will be moderthe pandemic, hitting pause on big decisions: ate or high. 23% are holding off on Meanwhile, the making large purchases survey respondents and/or projects indicate hope for the 15% are waiting to future. Eighty-three change jobs percent of Americans 7% are waiting to start/ believe they will attend college ultimately achieve Source: Northwestern Mutual long-term financial security, and 44% of that group said they believe it will happen in a year or less. Threequarters of those surveyed said they believe

the nation will return to full employment. Nearly 80% said they are confident the U.S. will return to economic growth.

AMERICANS’ EMERGENCY SAVINGS RUNNING OUT

That sound you hear is the sound of Americans’ emergency savings circling the drain. Roughly three in f i ve A mer ic a n s (61%) said their emergency savings won’t last through the end of the year or that they have already run out of savings, according to a Clever Real Estate study. Even more alarming — only 18.1% of Americans say they’ll still have some emergency savings remaining come Dec. 31. In the light of the pandemic, the biggest regret among Americans is not having enough emergency savings (40%), followed

DID YOU

KNOW The amount of money in U.S. checking accounts

?

18

jumped 33% to Source: $1.8National trillion in LIMRA 2Q. Source: Federal Reserve Source: Association for Business Economics

InsuranceNewsNet Magazine » November 2020

QUOTABLE We are still dealing with a number of significant reductions because of the pandemic. — Gus Faucher, chief economist at PNC Financial Services

closely by saving too little for retirement (32%). The economic impact from the pandemic might have a long-term impact on saving and spending: 41% of Americans say they’ll put more into emergency funds and save for the future, while only 10% of Americans say their spending habits will return to normal after the pandemic. In general, though, Americans are less worried about their financial future in September than they were in April. Even better news — the pandemic might permanently change the way Americans spend and save their money.

RACIAL INEQUALITY CARRIES HIGH PRICE TAG

Racial inequality cost the economy $16 trillion over the past two decades, according to Citi. Citi’s findings are based on analysis of factors including wages and education, housing, as well as equitable lending to Black entrepreneurs. Most of the lost $16 trillion is based on a lack of lending to Black entrepreneurs, which Citi estimates has cost the U.S. $13 trillion in business revenue and 6.1 million new jobs per year. Another $2.7 trillion in income has been lost because of Black Americans’ racial wage gap, while the lack of access to higher education for Black students could have added $90 billion to $113 billion in lifetime income. Finally, a lack of equality in access to housing credit, which could have led to an additional 770,000 Black homeowners, has cost $218 billion. The study found that $5 trillion could be added to the economy over the next five years if racial inequality gaps were addressed today.


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The year that pushed advisors into tech By Steven A. Morelli 20

InsuranceNewsNet Magazine Âť November 2020


T

ell Roger Relfe about electronic Roger Relfe is concerned about security transmission of with electronic communications but data and cloud trusts his dependable fax machine. storage all you want. He is having none of it. “I have yet to have a FAX hacked!” he will likely declare in his rich British baritone. That was one of his answers in a survey conducted by the National Association of Insurance and Financial Advisors on behalf of InsuranceNewsNet. Although at age 69, Relfe might fall into the demographic associated with the tech-averse, it is not a discomfort with technology that holds him back from using many tech tools. He has an ethical issue with relying on them. He is uncomfortable with the security risk exposure of transmitting data electronically, as well as the disconnect from his prospects if they are going through the process remotely. “I won’t know the person who’s applying,” Relfe said in an interview following the survey. “As an The COVID-19 shutdown has made agent, I have the responsibilities to both business a little more difficult for Relfe, the person signing up and the insurance especially because of losing his in-percompany that takes that application.” son seminars. But he is still busy. In fact, Relfe has been in the insurance busi- when he was contacted for this interview, ness for 30 years and has a practice called the phone call interrupted a fax he was 90 Degrees West in Swansea, Ill. (it is 90 receiving on an application. degrees west of London). In the 1970s, he His clients are more eager than ever for was interested in computers but chose to life insurance and are calling him for opspend 20 years serving with the Royal Air tions. Relfe had three contract signings on Force instead. his front porch in the past month. “I could have been a nerd,” he said. He uses a customer relationship man- No So Great For Others agement system, but only to keep track of The NAIFA tech survey found that important reminders, such as client birth- many of Relfe’s colleagues are not doing days and anniversaries. Then he sends as well, with 45% of 195 respondents handwritten cards by mail. saying business is somewhat or much Relfe said that data he maintains in his worse; 28% saying business is somewhat CRM is basic and he does not store in it or much better. what he would consider clients’ sensitive When asked to rate on a scale of 1 to 10 information, such as notes on what he has their difficulty in adjusting their businessadvised clients. es to pandemic conditions, respondents “It allows for personal notes to go in averaged 5. there,” he said, “which I would do if they Part of the reason for adjustment probweren’t too personal.” lems can be attributed to how much of

their business was already techbased. Nearly a third of the survey respondents did not have a CRM. Advisors with a national clientele had systems in place for handling business remotely from lead to issuance. That eased the transition to an all-remote world. Joe Templin has lived in that place since the 1990s. Even back then, most of his business was remote. “Seventy-five percent of my meetings were remote in the ’90s and early 2000s,” said Templin, who has a practice in Clifton, N.Y. “I would tell a client, ‘OK, do you want to meet face-to-face or do we want to do it over the computer so that you don’t have to deal with snow and parking and all that?’” He also had a growing national-level client base, conducting remote meetings with clients from Los Angeles to New York and everywhere in between. “Because moving electrons is a lot more efficient than moving molecules, as I tell people,” Templin said. His clients appreciate that because they are nerds, as is he. Templin graduated from Rensselaer Polytechnic Institute, a school so geeky, he said, that “the mascot was The Engineers.” (He is not joking.) “I’ve worked with hundreds, if not thousands, of people who work at General Electric as engineers and scientists,” Templin said. “So, I literally speak geek to them. They trust math. So, it makes the job really easy when you do your analysis, and then you just say, ‘OK, here are the

“As an agent, I have the responsibilities to both the person signing up and the insurance company that takes that application.”

Feeling Zoomed out? Turning off your camera can turn off some of the pressure.

“It’s the new judgment zone. People are like, ‘Wow, how much money do they make? Look inside their house. What do they got on? What’s your T-shirt?’ There’s a lot of bullying that goes on with Zoom. I see it all the time.” — Sheryl Hickerson

November 2020 » InsuranceNewsNet Magazine

21


5

Average answer to “How difficult was adjusting your business to adapt to closures?” on a scale of 1 to 10 (with 1 being “not at all difficult” and 10 being “extremely difficult”). SOURCE: NAIFA Survey, September-October 2020

Did your practice have a CRM system in place before the COVID-19 pandemic?

63.5% YES

Which CRM system did you have in place before the pandemic?

Which video platform did you use before the pandemic?

Redtail

Zoom

Wealthbox

Microsoft Teams

Salesforce

GoToMeeting

Ebix

Skype

Salentica

None

Other

Other 0%

10%

20%

30%

40%

numbers. Bam. Let’s talk about what it means and how to apply it, but numbers don’t lie.” Templin himself was a nuclear engineer who built weapons. His partner in his practice has bachelor’s and master’s degrees in chemical engineering. He got into advising after his godfaJoe Templin ther died unexpectedly without any financial planning, leaving “the classic American horror story,” Templin said. He helps colleagues who are struggling with integrating tech, but he emphasizes that strategy needs to come first. “They’re not breaking down what they need to do into manageable chunks and then building processes around it to make 22

50%

0%

it more efficient,” said Templin, who also leads The Intro Machine, which help professionals build introduction-based businesses. Here are some first steps Templin suggested:

Identify The Important Stuff

When Templin started in the business 25 years ago, the life insurance application was eight pages and clients signed one or two places. Now, it’s basically a book. But an advisor should not just throw the book at clients. “Figure out what 10 or 15 pages you’re going to present almost every single time with your clients,” he said. “Figure out your template, what you’re going to present.”

InsuranceNewsNet Magazine » November 2020

10%

38.5% NO

20% 30% 40% 50% 60% 70% 80%

Streamline That Stuff

Advisors should streamline that material within their presentation so they can minimize their time input. “Instead of dorking around on the computer and taking two hours to do this, do it in 20 minutes,” he said. “Then you can spend 20 minutes prospecting and getting more introductions, and 15 minutes practicing, so that you then increase your skill set, so that it generates more money for you on it.”

Process That Stuff

“You’re being more efficient with your time and you’re building replicable and repeatable processes that then allow you to be more effective,” Templin said. “So you can do more and more and reach out and help more people, and the side effect for that is, you make more money.”


we just do what needs to be done in terms of documentation, application, review, follow-up, what have you.”

Or if you need to have your camera on, turn off your self-view.

“I never look at myself. I have that off all the time so when I’m talking, I’m literally just talking to somebody else. I could have my hair in my face and I wouldn’t even know. That’s what we would normally do. But now with Zoom, people are like, “My hair, I got to fix my necklace. I got to fix my jewelry.” You don’t have to do any of that. So I turn it off and my fatigue level has ... I mean that’s why I’m able to do 50 of them a week.” — Sheryl Hickerson Templin describes his own process as a blend of “the Northwestern Mutual Granum system and your traditional engineering four quadrant rotation diagram.” That means his practice: » Sets an agenda for every single meeting to ensure they control the flow of information and don’t miss anything with the clients. “Also, it’s very good from a compliance point of view,” he said. “Then

» Meets with an initial client and talks to the person about what’s important. They use Zoom and Lifesize, a video platform that Templin says has better security. » Comes to a financial planning agreement. » Continues to gather data, analyze it, and develop and recommend solutions. » Documents each meeting, even if it is multiple meetings. “We will use Copytalk to basically download our brain into our CRM,” which is Redtail. » Follows the checklists generated by the CRM. “That way I can go back to a meeting six months later and be able to reconnect with all of it,” Templin said. “One of the things that you understand from a psychological point of view is, when you

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November 2020 » InsuranceNewsNet Magazine

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COVER STORY READY OR NOT review your notes from the meeting, it actually rekeys memory. So, you’ll pull some things that were hidden a little bit that you might not remember.” Templin said at the center of it all is the CRM. He understands why someone who is within 10 years of leaving the business would not incorporate a CRM at this point. But everyone else … “You might as well just pack up relatively soon because you’re missing out on sales opportunities,” Templin said. “You’re missing out on things that need to be

done for your clients. So, you’re not being a professional. You’re just playing around.” It is also a serious compliance issue when advisors need to show the documentation demonstrating why they made their recommendations. Advisors also might miss filing deadlines, exchange opportunities and other important details. “It’s essentially like having an alarm on your phone that goes off 15 minutes before you have to pack up and head home for your kid’s birthday or go to

Agent Tools For Prospecting, eRetail Sales And Applying For Insurance By Ken Leibow Life Insurance professionals need to leverage technology to engage with existing and prospective clients directly or indirectly. Growing sales and placing more business today requires consumer-facing insurance tools, and the integration of agent sales tools with quoting and electronic applications (eApp). There are new technology sales solutions for agents to use and new models like eRetail selling and social media marketing. However, an

There are many benefits to a CRM for an insurance agent or advisor, starting with contact management. You can store comprehensive contact information, demographic data and notes about your clients. You can keep track of their financial goals and personal and professional milestones. The work involved in prospecting and the cost of customer acquisition requires you to maximize every contact. A CRM also helps you manage your calendar and drive your day with extensive task and appointment management features. You can

You can gain that understanding with an intelligent technology CRM solution that helps you analyze, serve and communicate with your clients in the most efficient way possible. agent’s sales and marketing technology foundation must begin with subscribing online to a customer relationship management system.

CRM For Agents

The power of a customer relationship management (CRM) tool serves as the backbone to your practice. Your success depends on making your clients better off so that they place a high value on your services. And to do that, you need to understand their finances and needs better than they do. You can gain that understanding with an intelligent technology CRM solution that helps you analyze, serve and communicate with your clients in the most efficient way possible. 24

record outcomes to activities, create follow-ups, and receive text or e-mail reminders. Most CRMs offer reports out of the box and custom reporting capabilities. You can mine your client data for marketing and upsell and cross-sell opportunities. Generate clear, attractive reports for your clients to help them understand their finances. CRMs are known for their sales leads and opportunity-tracking capabilities for prospecting. You can create multistage opportunity processes to help you systematically identify, contact and follow up with prospects. Link opportunities with marketing campaigns to gauge the effectiveness of your marketing efforts. Sales tracking is also an important feature.

InsuranceNewsNet Magazine » November 2020

your doctor’s appointment,” he said.

A CRM For Any Budget

Ken Leibow, the CEO of InsurTech Express, was a bit surprised by how many of the survey respondents did not have a CRM. But he was a little more surprised by the CRMs that the others had. Specifically, he was surprised that the top CRM was Salesforce, which is a more general system. He expected to see more of the CRMs that are designed specifically for finance or insurance.

Keep it in the Microsoft family.

“If somebody’s not as sophisticated or computer literate, then I would say that it’d be easier for them to buy a PC laptop, Windows 10 and get Office 365. Microsoft is the largest software company in the world, and the software that adapts with Apple is not nearly as powerful or easy as the one that’s built for their Windows platform. I feel that my business runs better because I need PowerPoint and things like that. Being in a Microsoft environment is much better for running my small business.” — Ken Leibow Most CRMs today have a dashboard as soon as you log in that shows your sales metrics, appointments and follow-ups, with graphics and easy navigation for your day-to-day interactions with your clients. There are mobile app versions of CRMs or browser optimized for your smartphone or tablet for when you are mobile. The difference between a business agnostic CRM like Salesforce and Microsoft Dynamics 365 compared with a CRM already set up for life insurance agents and financial advisors such as Ebix SmartOffice and AgencyBloc is policy and investment tracking. You also want to exchange data easily and automatically with your CRM and other trading partners in the life insurance sales process. There are models where a CRM may be available by your upline general agency, in which they can feed your CRM pending case status on your submitted business. Some CRMs are set up to receive data from carriers and broker-dealers, in which you can get data imported into your CRM on in-force information on placed policies and investments. Another benefit of data exchange with your CRM is to integrate it with life insurance quoting and


READY OR NOT (Read about Ken’s agent sales tool recommendations below.) “Two things about Salesforce,” Leibow said. “One is you have to do a lot of setup work yourself. And two, it’s usually pricier.” He pointed out that there are many systems available, usually on a retail or enterprise basis. Enterprise would be available from an organization, such as a brokerage general agency. Retail is “just basically you give a credit card and you pay a monthly fee.” So, what kind of price range are we

looking at? “I would say that if I’m an independent agent, I’d be fine spending from $50 up to $80 a month,” Leibow said. “But you can get some things as low as $30.”

Tech As Equalizer

Sheryl Hickerson knows full well that some people are still tech-averse. She has been in the advising business for more than 30 years and is the vice president of business development at Highland Capital. But she is probably best known

illustration systems as well as pre-populating your client information with an eApp platform for applying and submitting business. This reduces the amount of data entry and provides tracking information on proposals and submitted business. Vendors such as iPipeline offer these types of integrations like with iPipeline’s LifePipe term insurance comparison quoting tool and its iGO eApp platform.

eRetail Tools For Agents

There is a new trend in the industry where quoting and eApp are offered by agents for consumers to use. These consumer-facing tools are not for a carrier direct-to-consumer sales model, but a way to market insurance products online and in social media while still maintaining the agent ecosystem. It frees up agents to focus on sales and marketing. Prospective customers can buy insurance anytime 24/7, and you get paid your commission. Millennials, for example, who are or are soon to be the biggest insurance-buying target market, prefer self-service purchasing but still want the agent available for expertise as needed. For example, BackNine insurance agency offers agents consumer-facing tools for an agent’s website called “Quote & Apply,” where the

Don’t use the website version of meeting platforms.

“We have a lot of clients who use Microsoft Teams and GoToMeeting or Skype or Zoom or whatever — but don’t use the website version, unless you’re just a guest for one time. That’s because all of their R&D dollars go into their apps. But you’ll find that the audio doesn’t work and whatever with the website version. They throw all their money into their apps. So, there’s a better or easier experience.” — Ken Leibow

consumer can run a multi-carrier term insurance quote from top carriers such as Protective Life, American General and Banner Life on simplified term insurance. The client then chooses a carrier, completes a simple questionnaire, schedules an exam and e-signs. This works on a laptop or mobile device. The agent’s contact information, or even in some cases a chat feature, is available for assisting the client as needed. Another example is Nimbus Insurance “Click-To-Buy.” Nimbus is an agency that offers some alternative insurance products like term insurance (up to $1 million without an exam), final expense guarantee issue, AD&D and HMA insurance from top carriers. The agent gets a unique URL that they can market in social media such as Facebook and Google. In both agencies, once the agent gets contracted and appointed, the software is free for them to use. As clients submit and pay for business in the self-service quoting and eApp insurance tools, the agent gets paid their commission. You, as an agent, are acting as an eRetailer of insurance.

Hybrid Agent To Customer Self-Service

There is another new model that is being offered by life carriers to independent agents. For example, ApplicInt is a vendor that has a quoting and eApp platform called U*Complete. The agent will run a multi-carrier quote, and then

COVER STORY

as the leader of the networking organization Females & Finance. “I think this is more men,” Hickerson said of people avoiding tech. “I find some that are still putting binders together. I’m like, ‘A binder? What’s with that? … Everything’s on a cloud.’” Women, on the other hand, are often more willing to dive in and ask for help when they need it, Hickerson said. Women are also looking for ways to differentiate themselves in a male-dominated business. select the carrier and complete a drop ticket. The agent then emails a link to the client. The customer is securely authenticated when they click on the link. The customer then completes the rest of Part A of the life insurance application, and Part B with medical questions is optional. The next step is e-signing the forms. Live chat with a call center is available for assistance. There is a warm transfer to the call center. An exam will be scheduled if needed. The forms and the data are then automatically sent to the carrier. The U*Complete software is offered by the carrier and free for the agent to use. With COVID-19, remote-selling life insurance is critical. There is an acceleration of consumer-facing sales technology solutions for remotely prospecting and engaging with customers from a sales and marketing perspective to applying for insurance. Using a CRM to track and manage your prospects and clients is where you must begin as an agent. You should then partner with general agencies and carriers that offer tools to help you engage directly or indirectly with consumers for marketing, quoting and applying for insurance. Ken Leibow is CEO of InsurTech Express. He has more than 30 years of insurance industry experience, with an extensive background in insurance technology for distribution and back office systems. Before founding InsurTech Express, Leibow worked for Genworth Financial, Mutual of Omaha, and as vice president of operations at Diversified Underwriters Services. Ken is a leader for industry technology standards, working with ACORD, LBTC, LIDMA, NAILBA, LIMRA, LOMA and IRI. He can be reached at ken.leibow@innfeedback.com.

November 2020 » InsuranceNewsNet Magazine

25


Sheryl Hickerson says the insurance business needed a firm push into the tech age.

COVER STORY READY OR NOT

Blah background? Move your foreground!

“People have a tendency to want to put their desk against a wall. I said, ‘Don’t do that. Actually, pull your desk out into the center of the room.’ I’ve hung a TV behind me. In fact, I usually have our Females & Finance logo playing back there. But sometimes I have CNN. Sometimes I have whatever. But I have stuff back there so that when I’m on Zoom, I look very professional, like I’m in a full office when I’m in a home office. Otherwise, what are you looking at? Maybe your closet doors, your whatever.” — Sheryl Hickerson Younger people in the financial services space also tend to be more current with tech. The insurance industry in general has been trailing finance in tech. For example, online applications and signatures could have been widely available much earlier, she said. “Think about what a different world we’d be in today,” Hickerson said. “We wouldn’t still be doing the ‘You missed a signature’ world.” But adoption does not just happen by itself, she said. People and organizations have to be taken to the water and told to drink. “The good thing out of 2020, out of this pandemic, is it has pushed people to use technology,” Hickerson said. “They have to.” Mindset is a key element. Hickerson said she sees greatest success when people look at it as an investment rather than a sacrifice or a risk. “We’re risk managers. I mean we’re risk-averse for the most part,” she said. “But the ones who do really well are not. They’re willing to take a chance. I was talking to an advisor up in Connecticut and he said, ‘Yeah, we spent $100,000 and bought this magnificent digital press. Now we’re busting out marketing materials and doing all this stuff.’ He saw it as an investment. It wasn’t a risk.” It is not only with the big spends, but with everything. People who are curious, flexible and resilient have been flourishing in an otherwise difficult time. “The ones who are investing are very pro-risk,” she said. “Right now, the whole thing with 2020 and the ongoing quarantine, those who were the invest-in people, 26

“The good thing out of 2020, out of this pandemic, is it has pushed people to use technology. They have to.” it was nothing but a thing. It was like, ‘Yeah, I got to figure out how to adjust Zoom. I need to change this room and put new lighting in.’ They were all looking forward to making it a better experience.” The risk-averse were not so eager. “They were, ‘I don’t want to take that picture off the wall. I don’t care if it offends anybody. I don’t want to change. I don’t want things to change,’” she said. “There is an enormous amount of hope that we’re going to go back to the way things were. I’m telling you that’s never happening. You know why? Because when our 80-year-old parents can learn how to get

InsuranceNewsNet Magazine » November 2020

on Zoom, they’re never driving down to your fancy office with your fluffy pillows on your couch again. Never.” Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@ adnewsfeedback.com.


2020 VISION — OR REVISION?

COVER STORY

Special Sponsored Section

This year’s Tech Guide covers future-forward digital inventions that give consumers unprecedented access to products, services and information, as well as those that give agents and carriers access to consumers. CONTENTS When Technology Gets Personal With Legal & General America......... 28 November 2020 » InsuranceNewsNet Magazine

27


with AppAssist clients. It used automated rules-based technology and data to make exam-free decisions for eligible applicants. There was room to grow, but it was clear the underwriting process would never be the same — leading to where they are today.

The future is here for many

And where they are today is pretty exciting. With a digital application platform and an enhanced accelerated underwriting process, LGA offers a faster, better application and underwriting experience specifically designed for the next generation of customers.

Here’s how it works:

Reflexive questions and an automated rules engine mean less hassle, fewer labs — and more families protected. And that’s just the start. Inspired by a tradition of innovation, Legal & General America (LGA) is on a mission to simplify and streamline the life insurance application process — aiming to reduce inconvenient, time-consuming medical exams and increase the number of Americans protected with life insurance. In the last year alone, LGA launched a new digital application platform and enhanced accelerated underwriting as part of that mission. Now, they’re rolling out an exam substitution program that will bring a lab-free experience to even more Americans. This continues decades of pushing the technology of life insurance forward, allowing agents to spend less time on applications and case management, and more time finding families to protect.

Pushing forward

Legal & General America’s journey to simplifying life insurance started in 2004 with AppAssist, an innovative,

best-in-class tele-application program. With AppAssist, advisors drop a ticket, and an experienced, in-house team takes over the application fulfillment and case management. The results were instantly clear — advisors spent less time on applications and more time finding new clients. And customers loved the personalized service provided on a call scheduled at their convenience. But LGA didn’t stop there. In 2009, they were one of the first in the industry to offer eDelivery — life insurance policies signed and issued electronically to customers at no additional cost. Once again, this benefits both customers and agents. On average, eDelivery policies are activated two weeks sooner, while agencies save valuable time and money. Today more than 70% of customers take advantage of the service. Then in 2016, LGA launched its first foray into accelerated underwriting

• Clients complete a convenient application online or over the phone with optimized question sets that cut down on time and help collect the most relevant information. • The online application takes less than 20 minutes to complete; it can be signed, paid and delivered electronically and an exam is scheduled, if needed • Here’s the best part: More than 25% of cases are approved exam-free, allowing policies to be approved in just a few days. And these days, getting it all done from home is best. • Even for those who aren’t approved exam-free, this process shortens underwriting review and reduces cycle time. All in all, LGA’s accelerated underwriting is a dream for agents — more clients approved with less work. “We’ve embraced a new age in the life insurance industry where adoption of new technology and capabilities is spurred by a renewed focus on putting the customer’s needs first — providing affordable coverage quickly and without paper or undue


hassle,” says Jennifer Torneden, LGA senior vice president of Sales & Strategic Growth.

Continuing innovation

As they look to the future, Legal & General America’s journey to simplify life insurance continues. With the launch of a new exam substitution program, LGA will increase opportunities for accelerated, labfree underwriting for both paper and digital applicants. Eligible clients

said. “I’m thrilled at the progress this industry has made over a short time, and over the coming years we’ll innovate in ways that we can’t even imagine yet.”

Better by the day

Since the digital application platform launched, LGA has been constantly updating and improving it. From providing a flexible, online agent hub that turns drop tickets into applications to adding sign, issue and payment functions to the eDelivery platform — LGA

“Over the coming years we’ll innovate in ways that we can’t even imagine yet.” can substitute traditional exams with Electronic Health Records or an Attending Physician Statement. This program, which LGA rolled out as a temporary measure due to the challenges of obtaining parameds during the COVID-19 pandemic, means an additional 20% of underwriting applicants could enjoy an exam-free journey to life insurance coverage. And when they get there, those eligible for substitutions will have the option to lock in up to $2 million in coverage. To further advance its digital and automated underwriting capabilities, LGA recently appointed Dawn Boitnott to the new position of Chief Underwriter & Underwriting Transformation Officer. “We’re continuing to move beyond the invasive medical underwriting process by building out a comprehensive, optimized and flexible automated rules engine within our digital platform,” Boitnott

is committed to always improving the digital application experience.

So is life insurance 100% lab-free yet?

No, not yet. But Legal & General America continues to expand its boundaries with the ultimate goal of helping people. In the meantime LGA offers a better, faster, more convenient experience for agents — and more Americans enjoy the protection of life insurance. Visit LGANewDigitalPlatform.com to access more information about our digital application platform, including training guides, videos and more.

All statistics based on platform experience in Q3 2020 *The new digital application is available for Banner Life business only at this time and is not available in New York. Legal & General America life insurance products are underwritten and issued by Banner Life Insurance Company, Urbana, Maryland, and William Penn Life Insurance Company of New York, Valley Stream, NY. Banner products are distributed in 49 states and in DC. William Penn products are available exclusively in New York; Banner does not solicit business there. Clients who do not fit all automated underwriting eligibility requirements may need to submit additional information like a paramedical exam or other labs or medical records. For broker use only. Not for public distribution. The Legal & General America companies are part of the worldwide Legal & General Group. 20-253

A Timeline of Technology 2004 – Tele-application program AppAssist debuts. This leads to 98% of completed interviews becoming formal applications. 2007 – AppAssist adds Voice Signature capability, allowing applications to be submitted to underwriting within 24 hours. It eliminated mailing delays and shaved nearly three weeks off the application process. 2009 – LGA launches one of the first eDelivery services in the life insurance industry. The robust service saves time for customers and racks up awards. 2011 – MobileSuite app is launched, allowing agents to run a quote, drop a ticket and get case status — all from their smartphone. 2014 – LGA launches Get More, which offers increased coverage options to eligible applicants with no additional underwriting. 2016 – The company takes its first step toward automated underwriting for eligible applicants through the AppAssist program. 2019 – LGA pilots a new digital application and an accelerated underwriting process, making lab visits a thing of the past for eligible applicants. 2020 – A new exam substitution program brings an accelerated underwriting path paper applications and allows more cases from the digital platform to be approved lab-free.


LIFEWIRES

COVID-19 Prompts More To Buy Life Insurance The COVID-19 pandemic has prompted many

How Much Is Enough? When asked how much life insurance they need

• 36% said they need equal to or double their annual income

Americans to take stock of their daily lives, and for many people, that means buying life insur• 28% said they need 3 or 4 times ance. An Unum survey showed nearly one in four their annual income. SOURCE: Unum adults (22%) will consider increasing their life insurance coverage this year. While 22% said the pandemic caused them to consider adding additional life insurance coverage, the numbers are even higher among several groups, including households with children (34%), Black adults (36%), Hispanic adults (38%), Generation Z (38%) and millennials (30%). Nearly half of those who responded (48%) said the death of their family’s primary wage earner would cause financial strain in less than three months.

NAIC LAUNCHES DISCUSSION ON RACE AND INSURANCE

As the insurance industry takes a hard look at how it can contribute to the national movement toward a colorblind society, the National Association of Insurance Commissioners established a Special Committee on Race and Insurance and gave the panel its marching orders. The NAIC Executive Committee established the special committee this summer and gave it four charges and instructions to report back by the end of the year. Ray Farmer, South Carolina insurance commissioner and NAIC 2020 president, said the work will take much longer than that. The committee’s charges are: Conduct research and analyze the level of diversity and inclusion within the insurance sector; engage with a broad group of stakeholders on issues related to diversity and inclusion in the insurance sector and access to insurance products; examine which practices or barriers create disadvantages for people of color in

DID YOU

KNOW

?

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the insurance business; and recommend next steps to the NAIC Executive Committee. Several industry trade associations are on board with NAIC’s efforts to examine racial issues. Susan Neely, president and CEO of the American Council of Life Insurers, advocated for four key strategies based on access, diversity, education and investment. Wayne Chopus, president and CEO of the Insured Retirement Institute, said his organization is focused on underrepresented minority groups, with a special eye toward the needs of the Black community.

MEET THE INDUSTRY’S NEWEST TRADE GROUP: FINSECA

A leng t hy process to merge t he A ssociation for Advanced Life Underwriting and GAMA International resulted in the group’s announcing its new name: Finseca. The name stands for “financial security for all,” CEO Marc Cadin said. The group formally merged earlier this year, but held off on a new name. Finseca’s goal, he said, is to unify all financial services in one coordinated effort around education, advocacy

QUOTABLE The life insurance industry has always functioned as a private sector safety net. — Mike Zarcone, head of corporate affairs, MetLife.

and elevation. Kelly Kidwell of Pacific Advisors, an agency of Guardian Life, is the incoming chair of the new organization, and Jeri Turley, of Winged Keel, an M Financial firm, is serving as chair-elect.

PEOPLE PERPLEXED OVER LIFE INSURANCE COST

Why Do They Buy?

Consumers may be aware of the benefits • 20% said because life insurance prothey got married vides, but they’re con• 20% said because fused about it. That’s they had a child according to an Erie • 14% said because they Insurance survey that bought a home. showed many signifiSOURCE: Erie Insurance cantly overestimated the cost of coverage. When asked why they don’t have life insurance, almost four in 10 (38%) said it would be too expensive. More than half of respondents (56%) estimated it would cost $300 per year or more, including 10% thinking it would be $500 per year and 11% guessing it would be more than $500 per year. Of those who purchased life insurance, 37% said they bought it to leave an inheritance for loved ones or to pay for funeral expenses, 32% said they wanted their families to have enough money to maintain their standard of living, 17% said they wanted money to pay off debt, and 10% wanted their spouse and children to keep their current home.

The National Association of Insurance Commissioners named Evelyn Boswell as its newly created diversity, equity and inclusion director. Source: NAIC Source: The Wall Street Journal

InsuranceNewsNet Magazine » November 2020


Many INvestors

are worried about having

the money

they’ll need in the future. A Jackson® variable annuity with the purchase of a living benefit1 has features that can protect2 your client’s income and keep it growing during market upturns and downturns—for life.3 And that can give you both a reason to smile.

Visit Jackson.com to see how your clients can protect and grow their income in any market. Variable annuities are long-term, tax-deferred investments designed for retirement, involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½. Before investing, investors should carefully consider the investment objectives, risks, charges, and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses, which are contained in the same document, provide this and other important information. Please contact The Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money. 1

Add-on benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity. Only one add-on living benefit and one add-on death benefit may be elected per contract. Once elected, benefits may not be cancelled or changed, please see prospectus for specific benefit availability. The long-term advantage of the add-on benefits will vary with the terms of the benefit option, the investment performance of the variable investment options selected, and the length of time the annuity is owned. As a result, in some circumstances the cost of an option may exceed the actual benefit paid under that option.

2

Guarantees are backed by the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York and do not apply to the principal amount or investment performance of the separate account or its underlying investments. They are not backed by the broker/dealer from which this annuity contract is purchased, by the insurance agency from which this annuity contract is purchased or any affiliates of those entities, and none makes any representations or guarantees regarding the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York.

3

On the contract anniversary on or immediately following the designated life’s attained age 59½, the for-life guarantee becomes effective provided: 1) the contract value is greater than zero and 2) the contract has not been annuitized. If the designated life is age 59½ on the effective date of the endorsement, then the for-life guarantee becomes effective on that date. All withdrawals reduce the GWB and, depending on the amount of withdrawals taken, adjusted for any GWB step-ups and, any applicable bonus, the GAWA may be reset to a lower amount when the for-life guarantee becomes effective. In certain states, we reserve the right to refuse any subsequent premium payments. Variable annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York). Variable annuities are distributed by Jackson National Life Distributors LLC, member FINRA. These products have limitations and restrictions. Contact the Company for more information. Jackson® is the marketing name for Jackson National Life Insurance Company® and Jackson National Life Insurance Company of New York®.

Firm and state variations may apply. For institutional use only. Not for public distribution or use with retail investors.

Not FDIC/NCUA insured • May lose value • Not bank/CU guaranteed Not a deposit • Not insured by any federal agency CNC18960A 04/20


LIFE

For Young Adults, The Hardest Part Of Life Insurance Is Getting Started Millennials and Generation Z say they believe in the value of life insurance, yet a large percentage of these young adults don’t own it. By Adam Winslow

M

any financial planning decisions benefit from early action. When it comes to saving for the long term, millennials and Generation Z have time on their side. Although we are currently in a period of extreme market volatility, if millennials and Gen Z start investing early, there is the potential for their assets to compound and appreciate over the next 40-plus years. Early action can be equally beneficial for another important financial decision — purchasing life insurance. Like budgeting, saving for the future and paying off debt, life insurance is an important part of a secure financial plan. For many young Americans, the hardest part may be getting started. Consideration of term life insurance can become that important first step. Age and health are the most significant drivers of policy cost and insurability. By purchasing a term life insurance policy at a low price when they are young and generally healthier, millennials and Gen Zers can lock in a level of immediate protection. Then, if the policy allows, which most do, they will be able to convert it to a permanent policy before the term expires — even if their health declines while the policy is in force.

A Missed Opportunity

AIG Life & Retirement’s recent Life Insurance IQ Study shows that millennials 32

and Gen Zers strongly believe in the value of life insurance. According to the research, seven in 10 respondents ages 18 through 38 say that life insurance will protect their ability to live a long, financially secure life. Yet half of millennials and twothirds of Gen Z do not have life insurance or are unsure if they do. For financial and life insurance professionals, this knowledge gap represents a missed opportunity to help young Americans develop a holistic financial plan that includes protection.

Need For Education

Protection is clearly something that is important for millennials and Gen Z. Nearly half said they currently have someone who depends financially on their care, including a child (34%), pet (22%), spouse

A key barrier to helping young investors get started with term coverage is the knowledge gap associated with all forms of life insurance. According to the AIG Life Insurance IQ Study, most millennials and Gen Zers do not have a solid understanding of the differences between term and permanent coverage. Nearly two-thirds (65%) indicated they did not know whether the death benefit for term life insurance is set at a fixed amount and does not change. Nearly all term life insurance purchased in the U.S. is level term, where the size of the policy stays at a fixed level for the length of the policy. That’s one of the many misconceptions that financial and life insurance professionals can help bridge through

(17%), parent (10%), sibling (7%) or friend (6%). Further, more than half of respondents ages 18 through 38 said leaving money to a loved one after they’re gone is their driving motivation for buying life insurance.

education. Another is unfamiliarity with the living benefits associated with permanent policies. Fewer than two in 10 respondents ages 18 through 38 are aware that some forms of life insurance can be used to build a

Caring For Others

InsuranceNewsNet Magazine » November 2020


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Life Insurance | Retirement | Employee Benefits OneAmerica.com © 2020 OneAmerica Financial Partners, Inc. All rights reserved.

C-34281 08/26/20


LIFE FOR YOUNG ADULTS, THE HARDEST PART OF LIFE INSURANCE IS GETTING STARTED

Do They Know What Can Life Insurance Do? • Seven in 10 respondents ages 18 through 38 said life insurance will protect their ability to live a long, financially secure life. • More than half of respondents ages 18 through 38 said leaving money to a loved one after they’re gone is their driving motivation for buying life insurance. • Fewer than two in 10 respondents ages 18 through 38 were aware that some forms of life insurance can be used to build a supplemental retirement income stream for themselves (17%), pay for a child’s or grandchild’s education (13%), cover nursing home or at-home health care costs if they experience cognitive or physical decline (13%), or leave money to a charity (5%).

SOURCE: AIG

supplemental retirement income stream for themselves (17%), pay for a child’s or grandchild’s education (16%), cover nursing home or at-home health care costs if they experience cognitive or physical decline (13%), or leave money to a charity (5%).

Start With Term, Convert To Perm

For insurance and financial professionals interested in helping millennials and Gen Z build a life insurance portfolio, 34

term coverage can be an affordable starting point, and term is often preferred for temporary, short-term needs. By educating millennials and Gen Z about the affordability of term coverage today — as well as the living benefits of permanent coverage for down the road — advisors can help young Americans flex “from term to perm,” when budgets allow. Reasons for converting to permanent insurance over time include:

InsuranceNewsNet Magazine » November 2020

» Term coverage can typically be converted into permanent coverage without a medical exam or the need to prove insurability. » The amount of coverage to convert can be flexible — you can often choose to convert all or just part of your term life insurance to permanent insurance. » Permanent insurance generally has the option to build cash value. A term life insurance policy does not. » The cash value accumulated within permanent insurance is tax-advantaged, allowing assets to compound and grow while they remain within the policy. » You can access the cash value of your permanent insurance during your lifetime.

A Call To Action

Fortunately, several of the misconceptions that used to deter 18-through-38-yearolds from recognizing the need for life insurance have faded with the times. Now most millennials and Gen Zers say that life insurance isn’t only for breadwinners, married couples or parents of youngsters. Eighty-six percent believe that stay-athome parents can benefit from life insurance, and 81% believe that the primary earner shouldn’t be the only household member with coverage. Ninety-two percent say that parents still may need life insurance after their kids turn 18, and nearly seven in 10 (69%) believe singles may benefit from life insurance. The challenge for insurance and financial professionals, then, is to break down the barriers that stand between young Americans and the protection they value. Because of its affordability, term insurance can be an important way for millennials and Gen Z to lock in future insurability and to begin the process of building a holistic financial plan that includes protection and security. Adam Winslow is chief executive officer of life insurance at AIG Life & Retirement. Adam may be contacted at adam. winslow@innfeedback.com.


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ANNUITYWIRES

Percentage by generation cohort who say they plan to increase usage of annuities:

In-Plan Annuities Find Sweet Spot

Baby boomer investors: 25% Millennial investors: 70% Gen X investors: 63% All investors: 42% SOURCE: Nationwide’s sixth annual Advisor Authority study

Advisors might finally be warming up to annuities, with a recent Nationwide survey indicating strong support for offering the products in retirement plans. The attitude change is due to passage of the Setting Every Community Up for Retirement Enhancement Act, which removes existing barriers to including annuities within defined contribution plans. Following the passage of the SECURE Act, nearly two-thirds of advisors and financial professionals (64%) say they are likely to adopt in-plan guarantees to provide guaranteed income within clients’ defined contribution plans. Nationwide’s sixth annual Advisor Authority study also found that advisors are most likely to recommend in-plan guarantees to “Emerging High Net Worth clients” ($500,000 to $1 million in investable assets). The survey was administered to more than 1,800 advisors, financial professionals and individual investors with investable assets of $100,000 or more.

RILAs EXPECTED TO KEEP GROWING

Registered index-linked annuities are the lone bright spot on quarterly sales reports. As long as interest rates remain super low, as expected, those RILA sales numbers will keep growing, analysts say. Through the first half of 2020, RILA sales were $9.4 billion, up 22% from the first half of 2019. “That market growing quite substantially over the past few years is already an indication of the direction of risk-sharing that’s going to arise in the market going forward,” said Peter Tian, head of pricing and inforce management, individual retirement, at Equitable. Tian was part of a recent panel discussion hosted by the Insured Retirement Institute devoted to the future prospects for annuity products. There will likely be more partnerships within the industry ventures as insurers get creative in expanding annuity options to a wide audience, panelists said. Otherwise, insurers are likely to keep tinkering with products while keeping guarantees low. DID YOU

KNOW

?

36

SUITORS TRY WOOING AMERICAN EQUITY HOLDERS

Rumors of a sale of American Equity have swirled for several years, to the point that executives would preemptively say they had no news about it during every quarterly earnings call. But it finally looks like a sale might happen. Athene Holding and Massachusetts Mutual Life Insurance are offering $36 per share of common stock to acquire American Equity, an offer in the neighborhood of $3 billion. The American Equity board has been aware of the offer since Sept. 8, when Athene and MassMutual sent the company a letter with the offer. As of press deadline, executives had asked shareholders to allow them to investigate the offer. “MassMutual would acquire all of the insurance operations and personnel of AEL, and Athene would reinsure 80% of the in-force policyholder liabilities of AEL,” according to the letter, filed with

QUOTABLE I would not be surprised to see it litigated again. — Dean Cameron, Idaho insurance commissioner, on the Department of Labor investment advice rule, if Joe Biden is elected president

the SEC. American Equity is a leading seller of fixed-index annuities.

NOT ENOUGH RETIREMENT TALK

The more educated Americans are about retirement and planning for that phase, the more annuities enter the discussion. The problem is that not enough Americans are talking to their children about retirement. More than half of Gen X-ers and 40% of baby boomers have never given advice to their children about planning for retirement, according to a new study from North American Company for Life and Health Insurance. “Even when Americans are talking about retirement with their children, it’s clear from this study that their advice is vague,” said Ann Hughes, chief distribution officer. “The first step in helping the next generation succeed financially could come from simply, clearly sharing what you’ve learned from your mistakes.” Baby boomers reported spending money on things they didn’t need, going into too much debt and not saving for retirement when they were young. That’s not what they talked about with their kids, though, according to the study.

Over half of all Americans (52%) say they regret not having more of their savings protected from market loss. Source: Allianz Life

InsuranceNewsNet Magazine » November 2020


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ANNUITY

Why The Annuity Tide May Be Turning Many people can benefit from the guaranteed lifetime income that comes from annuities. By Tamiko Toland

I

f Americans want to retire and set aside worries about future income, many of them are going to need some help from the insurance industry. Sure, those in the top tax brackets have an abundance of options and plenty of advice on how to manage their finances. However, many people can benefit from the guaranteed lifetime income that comes from annuities. Yes, I know that “annuity” is a dirty word. In fact, the 2020 Guaranteed Lifetime Income Study by Greenwald & Associates and CANNEX found that to be true yet again. One-third (33%) of consumers who liked the idea of guaranteed lifetime income lost interest once they heard the word “annuity.” Even so, the tide may be turning for annuities. Why the optimism? Let’s talk about the SECURE Act, which paves the way for sponsors to add guaranteed lifetime options to their plans (more on this later in this article) and, perhaps counter38

intuitively, may increase annuity sales outside of retirement plans. In fact, one-third (35%) of financial professionals we surveyed thought that clients will be more receptive to annuities because of SECURE. And one-quarter (27%) thought it would lead to an increase in annuity sales. Their clients are even more enthusiastic: Nearly half (46%) of consumers who hadn’t yet retired said they would be more interested in buying a product with guaranteed lifetime income if one were available within their retirement plan. These questions, which were part of the 2020 study, shed light on the unexpected consequences of legislation that focuses on employer-sponsored retirement plans. At first blush, it may seem like there is no relationship between that and retail sales. However, SECURE does two things in particular that we believe could affect how clients perceive annuities and embrace them as part of their personal retirement plan solutions.

Establishment Of Safe Harbor

For one, SECURE establishes a safe harbor for the selection of guaranteed lifetime income contracts. This means it is much easier for plan sponsors to add these

InsuranceNewsNet Magazine » November 2020

options to their plans, and we certainly hope that this will happen more often. We don’t expect a tsunami of employers rushing to add annuities to their plans, but even if adoption is slow, there is a secondary benefit of focusing attention on them. SECURE’s emphasis on annuities in itself is an endorsement of their value in increasing retirement security. After all, it was important enough for the Department of Labor to expand its regulations specifically to increase worker access to these products. Plus, the safe harbor itself shows that employers (and by association, their employees) can trust companies that meet certain criteria, validating the product. We believe that SECURE’s safe harbor allays concerns about the financial security of the companies issuing annuities.

Disclosure Of A Lifetime Income Stream

Another requirement under SECURE is the disclosure of how much income from a life annuity a worker would get from the current account balance. This provision takes steps to help savers understand how accumulated savings would translate into a regular guaranteed payment. For one thing, this addresses the psychological barrier clients face when handing over a very large amount of money in exchange for much smaller checks. But it turns out that investors want to know this too. After all, the calculation of future income from a lump sum is not intuitive, yet it is critical to paint a basic picture of what life in retirement will look like. In the study, half (52%) of pre-retirees thought that an estimate of future income would be more valuable than estimates of either expenses in retirement or how much to save. What does this have to do with financial professionals? First of all, clients will be seeing income estimates at least once a year on their 401(k) statements and may expect the same from their advisors. I see this as a virtuous circle that could finally help orient people to the idea of future income and give them a feel for how savings will eventually translate into a regular check. Second, many of those who haven’t been getting an estimate may not know what they’re missing — yet. Among


WHY THE ANNUITY TIDE MAY BE TURNING ANNUITY those who saw an income estimate, 80% thought it was very helpful. By contrast, among those who hadn’t seen an income estimate, only 52% agreed. If you don’t think your clients care about this calculation, you could be wrong in short order.

Filling In The Gaps

Guaranteed income options within defined contribution plans are still few and far between. While SECURE is intended to move the needle to increase retirement security, the reality for many workers is that they will not have access to workplace annuities in the near future. This doesn’t make it any less important an issue for retirement planning. For financial professionals, SECURE creates a prime opportunity to ask clients whether they already have access to guaranteed lifetime income through their employer plans. Best of all, based on the rationale I’ve laid out, this study suggests there is reason to believe clients may be more receptive than ever to the concept.

Employer-Sponsored Plans Must Step Up

Now, let’s get back to one of the core purposes of SECURE, which is to increase availability of annuities within retirement plans. If clients are more receptive to the idea when talking with financial professionals, why is it so important to see these options available at the workplace? Because many people who are very

Consumers and advisors find an estimate of monthly income in retirement the most helpful for retirement planning. Seven in 10 advisors provide this estimate always or often to their clients. interested in lifetime guarantees may never hear about them, whether or not they get professional advice. We have seen a disconnect between what advisors and consumers themselves report their interest in guaranteed lifetime income would be. Whereas two out of five consumers (42%) are very interested in these products, only a fraction of advisors (14%) think the same. This is especially true for those with savings between $100,000 and $250,000. As it happens, 40% of advisors have a minimum asset threshold in order to consider a client for an annuity. Among those who do, 68% require assets above $250,000.

Advisors see the SECURE Act as a positive context for annuities While the SECURE Act does not have a direct impact on advisor annuity sales, 35% of advisors believe it will increase client receptivity to annuities, and very few foresee a decrease in receptivity. The SECURE Act, which requires plan sponsors to provide an estimate of monthly income in retirement, presents advisors with an opportunity to convert these estimates into reality with the purchase of an annuity. SOURCE: CANNEX, Greenwald & Associates

Increases significantly

3%

Increases somewhat

32%

Will not change

47%

Decreases somewhat

3%

Decreases significantly

1%

This leaves a large chunk of workers who are interested in this type of solution underserved and shows why it is so important that employers start adding annuities as soon as possible. But in the meantime, financial professionals can and should respond to the unmet demand out there. Today, there is a growing opportunity for financial professionals to step up to the plate with more solutions that meet retirement income planning needs. Proper client education on how these solutions work is the cornerstone of the trust and confidence they need to commit to a plan. This has not changed, but I see that SECURE provides a nudge in the right direction with the new annuity disclosure and suggests that clients may have more appetite for income replacement, especially if they are not getting it at the workplace. After all, the income guarantee is designed to help replace a paycheck, since most will not be satisfied living on the income from Social Security alone. SECURE promotes changes that will close that gap. Until that outcome is realized — and even after — it will pave the way for workplace savings to serve as the jumping-off point for this conversation. Tamiko Toland is head of annuity research for CANNEX, which provides data and analysis on annuities. She may be contacted at tamiko. toland@innfeedback.com.

November 2020 » InsuranceNewsNet Magazine

39


HEALTH/BENEFITSWIRES

All Workers Need Paid Leave, Pru Says The president of Prudential Group Insurance called for a public-private partnership to

provide paid family and medical leave to all U.S. workers. Jamie Kalamarides, president of Prudential Group Insurance, described providing paid leave as the biggest opportunity to help workers as the economy takes steps to come back after the COVID-19 shutdown. Less than half (47%) of full-time workers have access to paid medical leave through employer-provided short-term disability insurance, according to an American Council of Life Insurers report. Only 30% of the nation’s lowest-paid private sector workers have access to paid sick days, for example, compared to 93% of the highest-paid workers, according to the National Partnership for Women & Families. Kalamarides said a federal solution to paid leave “would help to ensure consistent access for all workers.” Private paid leave programs with a public backstop should ensure full access to paid leave and a consistent base of coverage, Kalamarides said. Meanwhile, employers wishing to offer paid leave benefits that exceed the required minimum coverage would be welcome to do so.

ALEXA, HELP ME FIND COVERAGE

DID YOU

?

40

We need to find a way to come together and tackle the issue of health care costs. — Bill Kramer, executive director for health care policy, Pacific Business Group on Health

must be spent on healthcare costs and certain other expenses related to patient health.

Nearly 8 million people may receive a sur- ONLY 3 OBAMACARE CO-OPS LEFT prise from their health insurer — money Remember co-ops — those private, nonback. Health insurers are expected to give profit, state-licensed health insurance carritheir customers a total of $2.7 billion in ers that the Affordable Care Act established rebates by the end of this year, according to to increase competition in the Obamacare the Kaiser Family Foundation. The rebates marketplaces? If you can’t remember them, are nothing new — insurers returned a total it might be because there aren’t many of of $1.4 billion to their policyholders in 2019. them left. Of the 23 nonprofit health insurBut what makes this year stand out is that ance co-ops that sprang from the ACA, insurers are handing back so much more only three remain now that New Mexico money in a pandemic year. Health Connections will close at the end of Despite COVID-19, insurers aren’t hav- this year. ing a bad year, profitwise, Kaiser reports. One co-op serves customers in Maine, While they’ve paid out for claims related another in Wisconsin, and the third operto treatment of COVID-19 patients, they’ve ates in Idaho and Montana and will move paid far less than projected on claims relat- into Wyoming next year. Promoted as a ed to elective medical procedures, as more way to boost competition among insurpolicyholders ers and to hold down prices on the decided to Obamacare exchanges, the co-ops Medical Loss postpone elechad more than 1 million people enRatio Rebates tive treatment. rolled in 26 states at their peak in 2017 - $446M The rebates 2015, Kaiser Health News reported. 2018 - $706M relate to the Today, they cover about 128,000 2019 - $1.4B medical loss people, just 1% of the 11 million 2020 - $2.7B SOURCE: Kaiser Family Foundation ratio under Obamacare enrollees who get coverthe Affordable age through the exchanges. Care Act. The MLR requires the insurer to The co-ops were a last-minute adspend no more than 20% of premiums paid dition to the 2010 health law to satisfy by enrollees on administration, marketing, Democratic lawmakers who had failed to salaries and the like. The remainder, 80%, secure a public-option health plan on the marketplaces. Congress provided $2 bilAnthem will pay a $39.5 million settlement over a lion in startup loans. But according to The Fund, nearly all the co-ops cyberattack that exposed the personal information Commonwealth struggled to compete with established carSource: Economic Policy Institute of nearly 79 million people. Source: Associated Press riers, which already had more money and recognized brands.

Google, Apple and Amazon all have their sights set on the $6 trillion health insurance market, according to a report from CB Insights. The three big tech comp a n ie s a l re ad y h ave dipped their toes into the health care waters, and many observers expect them to get into health insurance eventually. The idea of obtaining health insurance from the likes of Amazon might not be too far-fetched, as a Capgemini survey showed 44% of those questioned said they would be willing to buy coverage from a tech company. Big tech companies may decide to become a licensed insurance broker or develop risk rating models for underwriting, according to the CB Insights report. Google already owns 10% of Oscar Health, investing $375 million in the company in 2018. Google’s Verily formed a subsidiary health insurance company with Swiss Re earlier this year. Amazon is working with Cigna to access health care through Alexa. Apple is a flagship partner in John Hancock’s Vitality program and UnitedHealthcare’s health plans.

KNOW

HEALTH INSURANCE REBATES COULD BE ON THEIR WAY

QUOTABLE

InsuranceNewsNet Magazine » November 2020

MLR Rebates Hit New Highs


THE PRESIDENTIAL HEALTHCARE DEBATE TRUMP

VS.

• Creates $1 billion in DHS grants to assist older adults, providing services such as home delivered meals and in-home care. • Disincentivizes Fee-For-Service Medicare so that it is not promoted over Medicare Advantage.

BIDEN • Focus will be on caregivers of people with children, older adults and people with disabilities • Possible changes to caregiver wage and hour legislation at the federal level • May expand existing benefits through SNAP and Medicaid

• Modifies the Value-Based Insurance Design payment model.

• $775 billion expansion plan to address the “caregiving crisis”

• Revise approval, coverage, and coding processes so products and services are brought to market faster, are reimbursed and more widely available (i.e. telehealth).

• Proposed plan financed by taxes on real-estate investors with incomes of more than $400k/yr, and by a tax increase on high-income earners.

Gain valuable insight on the future of healthcare in America. If you want to learn how proposed legislation will impact the needs of homebound seniors and policyholders in the coming months and years, visit TheAmadaReport.com now.

TheAmadaReport.com

HOW THE ELECTION WILL IMPACT HEALTHCARE POLICY AND IN-HOME CARE

November 2020 » InsuranceNewsNet Magazine

41


HEALTH/BENEFITS

Could Reference-Based Pricing Be The Answer To High Group Costs? Reference-based pricing can offer substantial cost savings for employers, but brokers must make them aware of the potential risks. By Kim Buckey

W

ith health care costs continuing to rise faster than the rate of inflation — and the rate of employee wage increases — one solution has been getting increasing buzz in the industry: reference-based pricing. But as with any radically different approach to health plan design, this strategy requires a well-planned and executed rollout to avoid compliance, legal and employee relations problems.

What Is Reference Based Pricing?

RBP plans set a cap on what they will pay for “shoppable” (e.g., nonemergency) 42

medical procedures and treatments. This cap, or “allowable amount,” is typically based on a percentage of the Medicare reimbursement rate. How does this differ from a traditional health plan? Most providers today charge a set rate (the chargemaster rate) for their services, and then negotiate a lower, “discounted” rate with insurance companies. Because each provider chooses its own price and each insurer negotiates its own discount with each provider, it’s difficult for employers to predict their health care expenses — particularly if they’ve contracted with multiple insurance carriers. Under these traditional designs, employers have little control over what they pay over the course of the year. They pay a percentage of the expense a participant incurs, but there’s no way to predict when and where a participant will need care — or choose to receive it. Consequently, RBP — where a given test or procedure will always cost the

InsuranceNewsNet Magazine » November 2020

same because the cost is tied to a reference point — may seem like the perfect solution.

Considerations And Risks

Although RBP can offer substantial cost savings for employers, it is not without its risks. And therefore, brokers should be certain to partner with a consultant who is experienced in RBP to set up and manage the program on an ongoing basis. One important consideration is the potential impact of an RBP structure on employee recruiting and retention. Introducing an RBP structure might be confusing enough to be off-putting to prospective employees. Furthermore, if not rolled out appropriately, this might result in workers leaving for an employer with a more traditional benefits package that is easier for workers to understand. Employee relations, therefore, is an important area of concern. For employees, learning a whole new process for obtaining health care, finding providers


COULD REFERENCE-BASED PRICING BE THE ANSWER TO HIGH GROUP COSTS? HEALTH/BENEFITS who will accept RBP reimbursements as payment in full and dealing with balance billing can be extremely stressful, and could potentially result in employees not getting the care they need. Therefore, a comprehensive communications plan and support resources are critical to any RBP rollout. Not all providers will be open to accepting RBP as payment in full. In fact, some providers may refuse outright to accept patients with RBP plan coverage or may require payment in full upfront. An experienced RBP third-party administrator can help manage negotiations with providers and steer employees to participating facilities.

date, there have been eight federal RBP lawsuits across the country. Most have been settled or sent back to the state courts. These suits have typically centered on the following: » ERISA violations - Hospitals have made claims that the plan document language did not reflect the RBP arrangement, the claims process was arbitrary and the vendor was engaged in prohibited transactions under the Employee Retirement Income Security Act. » Breach of contract - Hospitals argue that an implied contract was created between the hospital and the plan

Finally, there is the question of plan structure. Working with their brokers and RBP TPAs, employers must determine the following: » The reference point. As noted previously, the most common reference point is Medicare, which is able to set relatively low prices due to its buying power and access to actual hospital cost data. Most RBP plans add a 120%-170% markup to the Medicare reimbursement rate. The Rand Corporation reports many hospitals are billing employer plans as much as 250% of Medicare reimbursement. So, even with a markup to the Medicare rate, the reimbursement is

How Reference-Based Pricing Works An employee sees a provider and is billed for services.

If the billed amount is equal to or less than the plan’s RBP, the plan pays the provider.

In addition, there are compliance issues to consider. The Affordable Care Act includes a maximum out-ofpocket limit (currently set at $8,150 for self-only coverage and $16,300 for family coverage for 2020). Current guidance indicates that if reasonable measures are adopted to ensure participants have adequate access to providers that accept the reference price, those providers may be treated as “in-network” and only those charges must be applied to the out of pocket maximum. In addition, plan documents and communication materials must be updated so employees, providers and administrators all understand how covered charges will be paid. Litigation risk is another concern. To

If the billed amount is greater than the RBP for that service, the provider may bill the patient for the balance (e.g., balance billing).

when services were provided, and that the plan enjoyed the benefit of the services and therefore would be unjustly enriched if the plan pays less than the “contracted” amount. » Misrepresentation and fraud There have been allegations that the plan misrepresented the payment amount as a percentage of the billed charges rather than a percentage of the reference price. In addition, there were accusations of fraud relating to statements to participants that providers will accept the reference price payment as payment in full. Typically, the cases with jury trials resolve in favor of the defendant, as juries tend to be very sympathetic to perceived overcharges.

SOURCE: DirectPath

The employer ideally will have a system in place to handle that balance bill on the employee’s behalf — whether negotiating the bill, paying the difference or even taking the provider to court. far less than traditional network discounted prices. Other common reference points include providers’ reported costs, the average “wholesale” price or data from third-party databases. In each of these cases, the administrator will research local costs and work with the employer to determine the reference points. It’s worth mentioning that some TPAs will use multiple reference points and pay the higher value to the provider. » Plan design. There are many different “flavors” of RBP, ranging from “no network” designs (where all services are considered “out of network”) to a preferred provider organization structure where RBP is applied only

November 2020 » InsuranceNewsNet Magazine

43


HEALTH/BENEFITS COULD REFERENCE-BASED PRICING BE THE ANSWER TO HIGH GROUP COSTS? to out-of-network claims to plans that apply RBP only to certain procedures, such as joint replacements, colonoscopies, MRIs or dialysis. » Balance bill support. Employers must establish if (and under what circumstances) they will (or will have their TPA) cover the balance, if they will negotiate on the member’s behalf, and whether they will take the provider to court or the employee will be left to pay the balance on their own.

» How the plan works. This, of course, will depend on the structure and reference point selected. » Where workers can find a list of providers that accept RBP rates. For employers adopting the

From the employee perspective, RBP enables patients to know — in advance — just what a service or treatment will cost them.

Why RBP?

RBP is still a relatively new solution to a long-term problem. Depending on which study you read, between 2% and 13% of employers are currently using RBP, and another 10%-18% are considering moving to this model in the future. Although there is certainly a great deal to consider when evaluating whether an RBP approach makes sense for your clients, it’s important to remember the potential advantages. Employers have realized substantial savings on health care costs — cutting anywhere from 5% to 20%. And because prices are capped in advance, both the employer and the participants are better able to estimate their expenses. From the employee perspective, RBP enables patients to know — in advance — just what a service or treatment will cost them. And using a provider that accepts RBP can provide assurance that patients are paying a reasonable cost for the services they’ve received. After all, who wouldn’t want to pay 20% of, say, $1,000 instead of 20% of $5,000?

Educating Workers On RBP

If your client chooses to adopt an RBP plan approach, you and the RBP TPA must work with your client to educate employees on how the health plan works and how to use it cost-effectively. Ideally, communications will begin well in advance of the plan’s rollout in order to educate workers about the following: » Why the employer has chosen this approach. Although workers still may not welcome the change, understanding the rationale behind the change may minimize complaints and concerns. 44

information they need to make cost-conscious health care decisions. Beyond explaining RBP, employers must help their workers become more educated health care consumers. Because an RBP plan won’t pay more than a set amount, workers will undoubtedly have many questions about how their care is

no-network approach, workers can see any provider they choose — but the burden falls on workers to shop for their care. For participants in in network plans, maintaining a list of participating providers will depend on which pricing model the employer has adopted. » The advantages to the worker — the answer to the ever-important question “What’s in it for me?” » What to do if a provider refuses care, wants upfront payment or balance bills. Workers will need to learn to contact the TPA, who ideally will intercede with the provider on their behalf. A comprehensive, year-round communications plan is critical to ensuring employees and their family members learn how to use their plan appropriately. Help your client prepare print or online materials — such as FAQs — that can serve as reference tools during open enrollment and throughout the year as they use their plan. You might want to recommend that your client offer — or even require — one-on-one meetings with benefit experts during open enrollment. This provides an opportunity for employees to discuss their individual needs, ask specific questions about RBP and ensure they have the

InsuranceNewsNet Magazine » November 2020

covered — both at enrollment time and during the year as they use their plan. Resources such as patient advocates can answer these questions from employees, help them find providers that meet their needs, and resolve claims and billing issues in real time. Workers should also be encouraged to shop around for care so they can find an option that doesn’t exceed the amount the employer is committed to paying. Consider partnering with a transparency service, which will allow employees to research the potential cost of care and compare prices across several providers in their area. Despite its challenges, RBP can be an effective tool for employers to tackle rapidly rising health care costs. By providing transparent pricing, provider referrals and assistance with billing issues, employers can help their workers navigate the risk of balance bills while realizing significant cost savings. And by helping your clients create an effective communications plan, you can showcase your value as a trusted advisor. Kim Buckey is vice president of client services with DirectPath. Kim may be contacted at kim.buckey@innfeedback.com.


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Powell Says Stimulate Or Stumble Along

The economy is going to need a big booster shot if it wants to thrive in 2021 and beyond. That was the latest appeal from Federal Reserve Chairman Jerome Powell in October. Although the federal government stepped up with stimulus, extra unemployment compensation and business assistance early in the pandemic, it is not enough to keep the economy vibrant through the winter. New unemployment filings remained at about 800,000 a week as of October and that effect continues to ripple out to put more people out of work. “The expansion is still far from complete,” Powell said. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.” In the meantime, the Trump administration and Democratic legislators have not been able to agree on substantial assistance and have focused on smaller packages.

Ground Control To Advisor Tom

If you work at a firm and you are shopping around for a new place, be prepared for a possible virtual reality onboarding. That’s what Fidelity is doing with its new hires. More than 140 employees used virtual reality headsets as part of their remote onboarding to replace Fidelity’s traditional in-person training program, the broker reported. The virtual reality experience allowed participants to connect in a virtual meeting space as an “avatar” in order to get to know one another. As part of the virtual experience, participants engaged in scavenger hunts and word games, teleporting between indoor and outdoor environments to familiarize themselves with technology and socialize with fellow trainees. Employees could even practice their “elevator pitch” and receive feedback in real time. Well, our reality is virtual, so maybe the next step is virtual reality?

Billionaires Add Trillions To Their Money Mountains In case you were wondering whether the uber rich were getting

richer,

well, odds are you weren’t. But maybe you were wondering just how rich. Turns out, a lot. Billionaires’ wealth

boomed more than a quarter during the pandemic, popping up from $8 trillion to $10.2 trillion, according to research from

PwC. And that was just in a few months, between April and July. That is spread over 2,189 people, by the way. The ones in tech and health care are the ones leading the way in wealth generation and disruption, according to the report. Don’t expect those folks to just loll around on their piles of cash, either. “Scientists, computer programmers and engineers are revolutionizing industries at a pace never seen before and they are having a profound impact on the whole of the global economy,” the report said. On the plus side, the researchers said these billionaires tend to be philanthropic with their wealth.

The 10-Year Treasury Rate Is Not Terrible?

The spread between the 10Year and 2-Year Treasuries is actually a little wider now than it was last year.

Source: Federal Reserve Economic Data

November 2020 » InsuranceNewsNet Magazine

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COVID-19 Magnifies The Retirement Income Crisis The pandemic has sparked fears that investors could lose their life savings. How annuities can help ease those fears. • By Eric Henderson

T

he retirement income crisis is real — and the COVID-19 pandemic has intensified the challenge.

Four in 10 investors (41%) with investable assets of $100,000 or more said they are concerned about losing their life savings due to COVID-19, according to an

April survey from the Nationwide Retirement Institute. The study, “The Future of Client-Advisor Relationships,” found that as clients’ needs evolve, the model of a financial professional also must evolve. As Americans confront the pandemic’s new normal, they are struggling to cope with many competing mental, physical and financial concerns. But having enough money to live in retirement does not have to be one of them. Why are so many Americans concerned about their income in retirement, and where can they turn?

What Is Causing The Retirement Income Crisis?

Long before the pandemic began, there were concerns about disappearing pensions and the solvency of Social Security. The Wharton School at the University of Pennsylvania had already estimated that the Social Security trust fund, challenged by record-low interest rates and sluggish wage growth, was on track to be depleted by 2036. More recently, they determined that the pandemic’s impact on job losses, payroll tax revenues and the length of the recession would accelerate this depletion date by several years. They predicted that following the pandemic, a quicker V-shaped recovery could deplete the trust fund by 2034, and a slower U-shaped recovery could deplete the trust fund as soon as 2032. Meanwhile, companies have been moving away from traditional pensions for decades in order to shift the expense and the risk off their balance sheets. COVID-19 added even more pressure. Nearly half of the S&P 500 companies still have hundreds of billions of dollars in pension obligations on the books. But facing the perfect storm of the pandemic’s impact as well as record-low rates and pressure from shareholders and other investors, many have stopped offering these plans to employees. Still other companies are freezing benefits, and many more are looking for ways to eliminate this “liability” by offering employees lump-sum payments to take their money and leave their plans. For employees with public pensions, Pew Charitable Trusts found that there was a $1.24 trillion funding gap prior to the start of the pandemic. Now there are concerns 46

InsuranceNewsNet Magazine » November 2020

that the gap could increase by another $500 billion.

Where Does This Leave Investors?

As a result of these trends, a growing number of investors are forced to rely on their qualified retirement savings plans as a primary source of income in retirement. Unfortunately, during the pandemic, many were also forced to rely on their qualified plans as an emergency resource. Although qualified plans are designed for long-term savings, the CARES Act passed in late March allowed investors to make penalty-free early withdrawals for certain financial hardships, such as avoiding foreclosure or covering medical expenses. Our survey also revealed that 16% of investors were willing to sell shares from their qualified plans to help cover their expenses if COVID-19 impacted their ability to meet their financial obligations. Although an early withdrawal might provide near-term relief, many investors who go this route have been forced to lock in losses and stunt their long-term earning potential. There’s a bigger challenge. Although qualified plans are a source of tax-deferred or tax-free savings, most do not currently offer asset protection or guaranteed income, meaning investments and retirement income are subject to market risk. The SECURE Act, passed with bipartisan support late last year, is aiming to change this. This new legislation paves the way for plan sponsors to offer employees in-plan guarantees to protect their future stream of retirement income.

Where Can Investors Turn?

There is a silver lining. As the pandemic has progressed, investors have recognized the need for solutions that offer protection for their portfolios and provide guaranteed income — beyond the traditional means of Social Security and pensions. Our survey shows that following drops in the market and extreme volatility, more than half of investors (51%) said COVID-19 made them recognize the need for annuities to protect their investments against market risk. More than half of investors (51%) also said the pandemic made them recognize the need for annuities to protect their retirement income. For advisors and financial professionals, annuities can be a critical component of your clients’ holistic financial plans. Annuities can mitigate market risk and offer guaranteed income in retirement, to help increase clients’ confidence and ease their fears. Annuities can supplement other sources of retirement income such as Social Security or help bridge an income gap before Social Security starts. And with a floor of guaranteed income in one portion of their portfolio, your clients can invest another portion of their portfolio more


COVID-19 MAGNIFIES THE RETIREMENT INCOME CRISIS

If They Were Financially Impacted By COVID-19...

10% 18% 24%

of survey respondents said they would sell shares in qualified retirement plans, BUT...

of respondents don’t have a qualified retirement savings plan AND... of respondents don’t have nonqualified investments.

What Can You And Your Clients Do Next?

SOURCE: Nationwide Retirement Institute

aggressively for greater growth potential to fund a retirement that can last two to three decades or more. Among the many types of annuities, registered index-linked annuities and variable annuities with guaranteed lifetime withdrawal benefits can help your clients accumulate more tax-deferred savings for retirement after they’ve maxed out their qualified plans — and help them generate more guaranteed income in retirement. Sometimes referred to as structured or buffered annuities, RILAs are becoming increasingly popular because they can offer your clients a balance of both upside potential and downside protection. Clients can participate in stock market growth based on the performance of one or more underlying indices, such as the S&P 500, Russell 2000, MSCI EAFE or NASDAQ 100. They are provided a level of protection against market loss through a structure such as a buffer or a floor. With a buffer structure, the insurance company typically absorbs a first level of loss, and then the client absorbs any loss beyond that level. For example, if the buffer level is set at 10% and the underlying index declines 30%, the insurance

guaranteed lifetime withdrawal from their annuity, typically based on a fixed percentage of the asset value or benefit base. There is a wide variety of GLWBs available, with different features and benefits, so it is important to find one that will provide your clients a guaranteed income stream to best fit their unique needs. There are GLWBs offering a consistent guaranteed income stream that will never decrease throughout their retirement. There are other GLWBs with greater equity exposure that provide a variable income stream with more upside potential for both asset accumulation and income during retirement. Some GLWBs may offer a front-loaded income stream, with higher income during the first part of retirement to meet anticipated expenses or to bridge an income gap.

company will absorb the first 10% of the loss, and then the client will absorb the next 20%. Record drops in the stock market earlier this year raised concerns and brought back bad memories for many clients. While the market recovered quickly this time, concerns that another market drop could remain lower for longer next time underscores the importance of a floor structure. Limiting losses with a clearly defined level of protection could make the difference between being able to retire on schedule or not. VAs with GLWBs. With VAs, your clients have the greater earnings potential, but also the potential for greater risk. Clients can select from a range of underlying investment options, including asset classes such as stocks, bonds and alternatives. As the value of these underlying investments fluctuates based on movements in the market, so will your clients’ contract value. If your client is more risk-averse, they may be able to purchase optional guarantees that will provide a level of downside protection or return of principal. By adding a GLWB, clients have a “living benefit” that can provide a

In your role as an advisor or financial professional, it is crucial to listen to your clients and understand their goals. Protecting their life savings and having guaranteed retirement income they can’t outlive will frequently rise to the top of their priorities. But they may be intimidated by the challenge, especially when confronted by this complex new normal. That’s where you come in. By listening and understanding, you can help your clients define their goals and develop a holistic plan to reach them. By taking the time to educate clients and help them to understand annuities, you can help increase their confidence and ease their fears. Although some annuities have been perceived negatively, the industry has changed, and many products have evolved. When you help clients choose the right annuity to meet their unique needs, they can protect their assets without fear of losing it all in a market downturn today, so they can confidently grow their life savings for the future and solve the retirement income challenge. Eric Henderson is president of Nationwide Annuities. Eric may be contacted at eric. henderson@innfeedback.com.

November 2020 » InsuranceNewsNet Magazine

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INBALANCEWIRES Foods rich in vitamin K

QUOTABLE

Vitamin K Saves The Day Vitamin K doesn’t get the same

amount of attention as some of its more famous cousins, but this vitamin performs several crucial functions. Vitamin K is essential for healing wounds, turning the blood from a liquid into a sticky substance that forms a scab. This nutrient also strengthens bones and helps them resist fracture. And vitamin K may even slow down the buildup of calcium in your coronary arteries, helping to stave off a heart attack. So where does vitamin K come from and how do you get more of it in your diet? Think green – top sources of vitamin K include spinach, broccoli, kale and lettuce. Vitamin K deficiency is rare, but it can occur in people who have liver disease, Crohn’s disease or celiac disease. In addition, people who are on blood thinners should avoid taking vitamin K supplements and should watch their intake of dark green, leafy vegetables.

THE FRUIT THAT CAN GIVE YOUR BRAIN A BOOST

Wild blueberries may be small, but they pack a punch in terms of boosting brain health. A recent st udy examined 35 middle-aged individuals between 40 and 65 years old who were fed either one cup of wild blueberries or a placebo equivalent for breakfast. They were then asked to complete a series of cognitive tasks over the course of the day that tested brain function and memory. Those who ate the wild blueberries maintained a sustained level of concentration and performance during the day while those who ate the placebo saw their performance drop off as the day wore on. A 2011 study published in The Journal of Agricultural and Food Chemistry found that eating wild blueberries significantly improved the memory of older adults who were at risk for Alzheimer’s disease. DID YOU

KNOW

?

48

A study from 2007 found that wild blueberries’ anti-inflammatory properties could help slow cognitive decline in aging adults.

SPARKLING WATER COULD CARRY RISKS

Whether you drink sparkling water or sip seltzer, you may think you’re consuming a beverage that is healthier for you than a sugary soda. But beware of what may be in that bubbly. A new study from Consumer Reports found high levels of risky chemicals known as PFAS in popular brands of sparkling water, including Topo Chico, Polar, Bubly, and La Croix. PFAS are chemicals that don’t break down over time and can accumulate in the environment and in your body. There is evidence linking some PFAS to health issues such as high cholesterol, cancer, thyroid issues, immune system

One of the biggest diet mistakes I see with my patients is thinking about a diet as deprivation. — Leah Kaufman, registered dietitian

problems and low infant birth weights. There are no federal regulations for PFAS, although there are voluntary guidelines issued by the Environmental Protection Agency, which considers levels above 70 parts per trillion to be a health risk.

AWWW … CUTE ANIMAL VIDEOS HELP YOUR MENTAL HEALTH

Admit it — you’re addicted to watching videos of cute puppies, kittens, pretty much any small and cuddly animal. Go ahead and watch — researchers say viewing those cute videos can carry a health benefit. Research by the University of Leeds showed t hat w atch i ng adorable animals on video can reduce your stress and anxiety. The study examined how watching images and videos of cute animals for 30 minutes affects blood pressure, heart rate and anxiety. Students who were in the midst of studying for exams spent a half-hour viewing the animal videos, and saw their blood pressure, heart rate and anxiety go down. When participants were questioned, the study found that most preferred video clips over still images. Videos of animals interacting with humans were most likely to receive two thumbs up from the viewers.

3 million high school students reported they vape regularly. Source: 2020 National Youth Tobacco Survey

InsuranceNewsNet Magazine » November 2020


Promoting financial security for all As the voice of the financial security profession, Finseca’s sole focus is on creating an environment that enables people to protect and enhance financial well-being — for themselves, their families, and their businesses. Finseca members provide life insurance and retirement planning solutions that protect the dreams and promote the prosperity of the American people.

Together we are Finseca Join today at Finseca.org


INBALANCE

Don’t Let Emotional Overload Capsize Your Life How to recognize feelings of anxiety and deal with them appropriately. By Susan Rupe

I

magine riding in a raft as you maneuver your way through rushing whitewater rapids. Suddenly, you are thrown out of the raft into the water. What do you do? Instinct tells you to resist the rapids and try to climb back into the raft. But that will end up in failure because the raft is slippery and keeps moving downstream, and attempting to stand up in the water will get your feet stuck in the rocks. Your rafting instructor will tell you to do things differently. Take a breath, wrap your arms around your life jacket or preserver, put your feet up in front of you and stay relaxed until the rapids take you to calmer water. Between the pandemic, the current political situation and the unrest that is gripping our nation, many of us feel as though we are riding that whitewater current. We are experiencing what Jacqueline Amor-Zitzelberger called “emotional overload.” 50

Amor-Zitzelberger is a certified mental health first-aid instructor with Penn State Extension Services. She conducted a recent webinar in which she discussed coping skills for anxiety and depression. Emotional overload, she said, is a state of being affected by intense emotion that is difficult to manage, and it can affect your ability to think and act rationally. “Many of us are feeling fearful and helpless,” she said. “High levels of anxiety over a long period of time often lead to depression. It’s important that we learn to recognize and understand our feelings without judgment. We can learn to own our feelings and deal with them appropriately.” Anxiety, Amor-Zitzelberger said, “is a normal reaction to stress, and it can be beneficial to us in certain situations so it can alert us to dangers.” But unproductive anxiety, she added, “differs from the normal feelings of nervousness and anxiousness, and it involves excessive fear. This type of anxiety can cause people to avoid situations that trigger them and can affect your job and your personal relationships. This unproductive anxiety can lead to an anxiety disorder.” The pandemic has magnified certain

InsuranceNewsNet Magazine » November 2020

fears that lead to anxiety, she said. “It’s the fear of being alone, fear of illness, fear of germs.”

Social Distancing Isn’t Helping

People who have anxiety are usually encouraged to help control it by seeking social contacts, Amor-Zitzelberger said. But social distancing is leading to isolation and loneliness. “Worrying about your finances, caring for children and elderly parents, job insecurity, food insecurity — they all contribute to anxiety,” she said. During the pandemic, it might be difficult for the average person to detect whether someone is social distancing or suffering from anxiety, Amor-Zitzelberger said. “So it’s important to ask them how they are managing at this time,” she said. “You can ask them something like, ‘How are you keeping busy?’ And their response should give you a clue.” With more people working from home, it also may be more difficult to determine whether someone is experiencing anxiety or simply adapting to the WFH lifestyle. “If you see someone is not bathing every day or is wearing the same clothes every day, it’s hard to tell whether they’re having difficulty with anxiety


DON’T LET EMOTIONAL OVERLOAD CAPSIZE YOUR LIFE INBALANCE

Stinking Thinking

Change your thinking: Due to the COVID-19 pandemic, I’m unable to get things done at home and work when others are depending on me.

Situation

(What triggers the problem?) • Criticized at work

Thoughts

(What goes through my head?) “I’m not good enough”

Physical Reactions

Emotions

(How does my body react?) Feel tired, loss of appetite.

(How do I feel?) Worthless, anxious

Behavior

(What do I do?) Avoid contact with others

SOURCE: Penn State Extension

or it’s just because it’s easier to throw on a jacket and sit in front of a computer, since they don’t have to get dressed up for work,” she said.

Recognize The Signs

Someone who is experiencing anxiety or a mood disorder will display various signs, depending on the severity of their emotions, Amor-Zitzelberger said. She provided a rundown of the symptoms.

work, odd or erratic behavior, declining personal hygiene, agitation, increasing sadness and worry, hopelessness, rage and despair. Crisis signs: Threatening to hurt or kill themselves, acting recklessly or engaging in risky behavior, excessive vomiting, difficulty breathing, overdosing on drugs or alcohol, dramatic changes in mood, and feeling trapped and believing there is no way out.

People who have anxiety are usually encouraged to help control it by seeking social contacts. But social distancing is leading to isolation and loneliness. Early signs: Sadness, worry, showing up late, canceling personal or professional commitments, looking tired, wearing disheveled clothing, appearing more unkempt than usual, no longer enjoying work activities or hobbies. Worsening signs: Withdrawal from friends and family, absenteeism from

Stamp Out ‘Stinking Thinking’

Dr. Aaron T. Beck, a psychiatrist at the University of Pennsylvania, pioneered the practice of cognitive behavioral therapy in the 1960s. He found that patients who have anxiety experience streams of negative thought that pop up spontaneously. Beck called them “automatic thoughts.”

Amor-Zitzelberger called them “stinking thinking.” “It’s a cognitive distortion that takes place in our minds when we experience upsetting events,” she explained. “Those events could be something relating to the pandemic or an argument that we had with someone. And we think about it in a way that justifies or reinforces our negative emotions and feeling bad.” Examples of this stinking thinking include thinking the worst will happen, believing that life is unfair and focusing on the negatives of a situation. It’s easy to become trapped into a cycle of negative thinking, AmorZitzelberger said. But one easy way to break out of the cycle is to reframe your thoughts. She cited the whitewater rafting analogy mentioned earlier in this article and said it is an example of how to manage your thoughts and emotions at a time of crisis. She provided the following steps to deal with negative thoughts and emotions during anxiety-inducing times. 1. Catch it. Recognize when you are having negative or unhelpful thoughts. 2. Control it. When you find yourself thinking negatively, silently say “stop” to yourself to stop the downward spiral of thoughts leading to sadness, guilt, anxiety, self-doubt or hurt. 3. Challenge it. Challenge what you say to yourself. 4. Change it. Change the negative messages you say to yourself to more realistic and positive ones in order to bring about more positive and pleasant emotions. 5. Cherish it. Enjoy the moment and the feeling you have just created. Susan Rupe is managing editor for Insurance NewsNet. She formerly served as communications director for an insurance agents’ association and was an awardwinning newspaper reporter and editor. Contact her at susan.rupe@ innfeedback.com. Follow her on Twitter @INNsusan.

November 2020 » InsuranceNewsNet Magazine

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BUSINESS

Valuating Your Practice: 2 Costly Mistakes To Avoid An expected wave of advisor retirements underscores the need to accurately valuate their practices. By Mike Walters

R

oughly 37% of financial advisors in the U.S. are expected to retire before this decade is over, according to a Cerulli Associates report. This will account for $7.76 trillion, or 39% of all assets managed by the nation’s financial advisors. With the industry’s own retirement crisis mounting, the COVID-19 pandemic is pushing advisors to think more urgently about the value of their practices in preparation for an accelerated exit. This creates an acquisitions atmosphere ripe for mistakes and rushed judgments on both the buy and the sell sides of the equation. Sellers, however, have the most to lose during this frenzy, as their own retirement dreams and legacies are at least partially hinged on 52

a successful sale — and that requires a proper valuation. To find the value of your practice, it’s important to perform a business valuation that will determine its realistic worth and potential for growth. During this process, be sure to avoid

from? Do you have a process that ensures regular meetings with potential clients? Also consider geography. Does your practice dominate a neighborhood? How about a specific social stratum of a town or city? Are clients predominantly in a certain profession?

The COVID-19 pandemic is pushing advisors to think more urgently about the value of their practices in preparation for an accelerated exit... these common, costly mistakes that can create a flawed valuation and derail potential deals.

Mistake #1: Neglecting valuecreating factors

First, identify the factors that create value. For example, consider your practice’s position in the marketplace. What is your client base? Where do your new clients come

InsuranceNewsNet Magazine » November 2020

Never forget about referrals. Is there a business process that keeps a steady stream of referrals walking through the door? Next, find the benchmark valuations for each piece of the business that adds value. For example, the industryaccepted benchmark for recurring revenue from advisor fees is 2 to 2.5 times annual income. If your business makes $200,000 in recurring fees annually,


VALUATING YOUR PRACTICE: 2 COSTLY MISTAKES TO AVOID BUSINESS

Total Advisor Head Count To Drop Over Next Decade 40.7%

40.7%

39.7%

31.1% 24.7%

wirehouse channels

independent national and brokerregional dealer brokerchannels dealer channel

hybrid RIA channels

bank brokerdealers

SOURCE: Cerulli Associates

this part of the business can be fairly valued at somewhere between $400,000 and $500,000. Commission income that does not recur has a lower valuation. It is still valuable to the buyer if the business has processes to ensure that opportunities for additional commissioned sales persist. This can be achieved through a referral network, name recognition, an advertising process, a location or a business partnership. The industry-accepted benchmark is 0.75 to 1 times annual revenue. The more certainty that commission sales revenues will continue, the higher this valuation can be. A business that relies on cold calling and has fluctuating sales has low reliability; therefore, a valuation under 1 times is reasonable. A business with a consistent process for maintaining a referral network

deserves a 1 times valuation. With that said, valuing a business is sometimes more art than science. No two businesses are the same. The previous questions and benchmark valuations provide examples but are far from exhaustive.

Mistake #2: Instigating a valuation gap

Valuation gaps are the No. 1 reason that practice transactions fail to close. A valuation gap opens when the seller believes the business is worth more than the market is willing to pay. Sometimes this occurs because the market has changed since the seller calculated the value. In other cases, the seller remains unaware of the valuation gap until confronted with it during the sales process. Often sellers are too optimistic, believing that because they worked hard

to build their book of business, it should have a higher value. This is irrelevant from the buyer’s perspective, and because the buyer may change processes, the business may be worth less to them. To avoid the valuation gap, ensure that benchmark valuations are realistic. With a rapidly changing market and so many industry variables at play, it is essential to reevaluate every year so the valuation is up to date. Also, understand that the value is based on what buyers will pay. Even though you may have put your blood, sweat and tears into developing the business, you must remain objective. Buyers want to invest in a robust practice and an incoming client base that can continue generating powerhouse profits despite the key player, the seller, exiting the business. Many of these practices run on the sole proprietor model, where the owner’s efforts, personality and vision are the main drivers of success. These practices are worth less than those with established processes that are easily transferable to the new owner. For example, valuations can increase when there is a robust email marketing list proven to drive crowds of potential clients to seminars and similar prospecting events. Building a financial advisory practice is a lucrative and rewarding endeavor. It’s a privilege to help people achieve their financial goals while reaching yours at the same time. However, in all careers, there comes a time to retire or move into a new sphere. Selling the business for the valuation it warrants takes planning, the same kind of planning that goes into allocating an investment portfolio. By learning to value your business correctly and repeating the process annually until the inevitable sale, you’ll be more confident and at peace when the time comes. The key is understanding benchmark valuations, being realistic and sustaining transferrable business processes that make buyers willing to pay more. Mike Walters is the CEO of USA Financial. He is also the host of Advisor Skinny, an original podcast for financial advisors aimed at helping them enhance the enterprise value of their firm. Mike may be contacted at mike.walters@innfeedback.com.

November 2020 » InsuranceNewsNet Magazine

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INSIGHTS

The Million Dollar Round Table is the premier association of the world’s most successful life insurance and financial services professionals.

8 Ways To Turn Social Media Into A Weapon For Success Used correctly, social media can generate leads, build solid relationships and strengthen your brand. By Sukanta Singha Roy

A

s technology continues to advance, social media has become an integral part of an insurance agent’s marketing efforts, providing an opportunity to increase visibility and meet clients on a platform that encourages engagement. The more a prospect gets to know you, the more likely they are to trust you and invest with you. Plus, social media can help you find the audience that is most important for growing your business and provide a direct communication channel to reach them. What is the secret behind using social media as a weapon for success to increase your agency’s reach? By using the following eight techniques to leverage social media, I have generated leads, built solid relationships and strengthened our brand.

1. Determine where to reach your target market

Find out which social networks are most frequented by your desired clients. This may vary depending upon the age groups, geographic locations and individual preferences of your ideal client base. Focus your targeted content on the appropriate social media platforms for optimal return on investment.

2. Create relevant and useful content

Whether it’s a blog post or an infographic, make sure the content you create is relevant to the customers you serve. Highlight your unique skill sets and the services you offer to keep your customers engaged, establish your areas of expertise and boost your credibility. 54

3. Share curated content

You are an insurance agency, not a content publisher. Although it is important to create native content when you can, it is just as beneficial to share posts from industry thought leaders as well. Developing relationships with respected publishers can increase your visibility and help you reach a wider audience within your target markets. Highlighting content from other experts and engaging with them on social media are effective ways to build your digital footprint.

4. Post regularly

Reaching your follower base regularly is essential to establishing your agency’s social media presence and developing relationships. A good rule of thumb is to post once a day on Facebook and Twitter and two to three times a week on LinkedIn. Irregular communications can be overlooked, while consistent posting can keep you top of mind.

5. Use pictures and videos

Using media with your content can increase follower interaction and post shareability. However, make sure the pictures and videos you use are cohesive with the content you are posting. To differentiate your content, I recommend that you avoid reusing the same pictures too frequently in order to capture your followers’ attention with each and every post.

6. Establish a two-way conversation

Social media is the perfect venue to create an open dialogue with your customer base. Make sure you create a platform for customers to speak and interact with your agency. You should respond to every comment, review or inquiry — good or bad — posted on your page, as soon as possible. Your agency can earn your followers’ trust and exude authenticity by responding to criticism and resolving any issue that may arise.

InsuranceNewsNet Magazine » November 2020

7. Stay authentic and on brand

Establish the image you want to portray, and create a voice that coincides with your company goals and mission statement. Make sure every post adheres to your brand to further increase your credibility. Even if you create numerous posts that are consistent with your purpose, just one off-brand post can undermine your efforts.

8. Analyze your post results and adjust

Whether you use Facebook Insights, Google Analytics or other methods of gathering metrics, it is important to evaluate the results of your social media posts. This will allow you to establish which topics are successful in creating follower interaction as well as the types of content and media that breed the most discussion. Analytics can also help you determine the best time to post on social media. Once you have a solid grasp of the content that interests your followers, adjust your future posts to fit the established template. Showcasing your brand and expertise on social media is one of the best ways to keep current clients engaged and to attract new prospects. The next generation of clients likely frequents social media when researching important decisions in their life, such as financial planning. By leveraging social media, you will elevate your business to the next generation on digital platforms. Sukanta Singha Roy, CFC, FSS, is a seven-year MDRT member who has helped thousands of people in need of financial planning in various aspects of their lives, such as children’s education, retirement planning, tax savings and legacy building. He spoke at both the MDRT Annual Meeting and the MDRT Global Conference in 2016 and 2019. He may be contacted at sukanta.singha.roy@innfeedback.com.


INSIGHTS

Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every congressional district in the United States.

Rising To The Challenges In A COVID-19 Business World Advisors share their experiences connecting with clients in a socially distanced world. By Ayo Mseka

W

hile COVID-19 has proven to be exceptionally challenging for many agents and financial advisors, the pandemic has created a unique opportunity for others to take stock of their financial practices and identify innovative ways to find success in today’s new normal. NAIFA recently asked a couple of its members about some of the steps they are taking to thrive in today’s competitive business environment. This is what they shared with us.

Ali Agha, Senior Development Manager, New York Life, New York

We’ve been doing a lot of financial education webinars on topics such as managing market volatility, tax shelter strategies, estate planning and retirement. We’ve used social media as well as leveraged our agents’ warm markets (friends, family, clients, etc.) to invite them to these webinars. We have placed increased emphasis on digital engagement using LinkedIn and Ali Agha Facebook. It is essential for our professionals to engage with prospects regularly. Social media is a powerful relationship-building and referral tool, especially in today’s virtual environment. Our agents focus on staying on top of life changes (a new job, a new house, etc.), messaging prospects for “coffee meetings” to network. There are many great networking events happening on Zoom, and Zoom

has features to facilitate effective networking without hundreds of people talking over each other. We’ve also recommended to our agents that they create their own networking groups of four to five professionals from different industries to share business ideas and, ultimately, referrals.

flexibility and technology into their practices. This enables their workforce to be remote when life demands. Companies are also noticing who can thrive in this setting and who cannot. Those who have found ways to stay connected with their employees on a business and a personal level Susan L. Combs, CEO, will be primed to roll Combs & Company, with the punches, no New York matter what comes I started my firm more than their way. 15 years ago and I always If you didn’t have a believed that as long as you solid network of rehad your phone and your ferral sources before computer, you should be COVID-19 struck, able to work anywhere in you most likely expethe world. rienced a quick dose Susan L. Combs I travel a lot (preof reality in the midCOVID-19) for work, and dle of the quarantine. this has been good for me not only from Although so many things are set up vira business aspect but on a personal one tually now, being digital allowed us to as well. When my father was dying two reconnect on a deeper level with our netyears ago, I worked from Missouri fre- working partners. When you think about quently and then, ul- it, they are now “inviting you into their timately, worked from homes” when networking. This served as there for almost the en- a way for us to build even greater social tire summer leading up capital with our referral sources and to to his death. This allowed hit the ground running when some reme to be where I needed strictions were eventually lifted in some to be not only physically places. but “digitally” as well. During the summer months, we have Fast-forward to this always taken the opportunity to connect year when cities and one-on-one with our networking allies states from around the outdoors and enjoy the nice weather. country went into quar- This is because we see more people want antine mode because of a physical connection, even if it is from COVID-19. This was true a social distance. As a result, they jump especially where I live in at the opportunity to meet in a park or New York. I saw friends and colleagues take a walk outside to strengthen their scrambling to get technology and proto- networks even more. cols in place which, fortunately for us, we Ayo Mseka is editor of had set up from the very start. I know that in our industry, some peo- NAIFA’s Advisor Today magazine. She may be ple are slow to let go, and they think that contacted at ayo.mse“everyone has to be in the office during ka@innfeedback.com. all business hours.” But I am now seeing companies excel by incorporating new November 2020 » InsuranceNewsNet Magazine

55


More than 850 financial services companies in more than 70 countries turn to LIMRA first to help them build their businesses and improve their performance.

INSIGHTS

Wellness It’s an ideal time for the financial services industry to support consumers in protecting their financial health and their personal well-being. By Scott Kallenbach

S

taying healthy — physically, mentally and financially — was a priority for Americans even before the country experienced the worst health and economic crisis in generations. There may never be a more ideal time — for insurers and advisors seeking to extend their value propositions to customers — to blend financial protection with health maximization and disease prevention. For the financial services industry, this represents a unique opportunity to

Is The New Black enthusiasm. Consumers cite lack of time, lack of motivation and feeling overwhelmed as reasons for not improving wellness. The opportunity here is for advisors to communicate and form connections with consumers: » Recommend apps such as RealAge, and time-saving personalized training devices such as Peloton. » Provide social nudges about minimum sleep requirements. » Offer a comparison to others in their demographic. » Emphasize products from insurers that connect wellness with rewards (e.g., Vitality or Aspire from John Hancock).

Financial Wellness

Similar opportunities to support customers and build business exist in the financial

Wellness Areas Ranked by Consumers’ Interest in Them

97%

interested in improving performance in at least one area. Source: LIMRA Consumer Life Insurance Trends Survey, 2020: BCG analysis

play a more holistic role in supporting consumers in protecting their personal and financial health.

Physical Wellness

Consumers show a strong interest in improving their physical wellness. Recent LIMRA and BCG research shows that 97% of consumers are interested in improving at least one aspect of their wellness: exercise, sleep, diet, etc. Real life, however, often curbs this 56

wellness arena. Workplace benefits offer a critical avenue by which many Americans access financial health benefits. Bureau of Labor Statistics data indicate that 64% of private industry workers have access to a defined contribution retirement plan through an employer, and 41% have access to workplace wellness plans. In addition, consumers are aware of their need for financial wellness, with more than 50% acknowledging their need for more savings.

InsuranceNewsNet Magazine » November 2020

As with physical wellness, however, reality often interferes with best intentions. Recent Secure Retirement Institute research indicates that nearly half of households only have enough emergency savings to cover three months of expenses. Given the ongoing economic uncertainty created by the pandemic, consumers may be putting off long-term goals to focus on short-term needs. The CARES Act opened up the possibility of new types of withdrawals from retirement plans, and SRI research shows 9% of workers taking advantage of that new option as of May. The same opportunity exists here for advisors to communicate and form connections with consumers, in terms of effective, holistic financial wellness: » Tailor offerings to meet individual needs. A young family may need help with life insurance or a 529 plan; a woman in her 60s may have questions about Medicare and Social Security; others may prefer investment assistance given the volatility of today’s market. » Connect consumers with digital tools to help manage their money in terms of day-to-day budgeting, savings or debt reduction. » Reach out in person. Even though many people express interest in tools that are digital, easy to use and designed for repeat engagement, offering face-to-face advice (even via Zoom) will resonate. Decisions about health and financial wellness are complex — especially given today’s volatile environment — so it makes sense for people to reach out to an expert. The growing need for improved financial health parallels the need to steer consumers toward best practices for physical health. In both cases, healthy lifestyles translate into potentially greater longevity for consumers, greater productivity for employers, and greater opportunities for insurers and advisors. Scott Kallenbach is senior director, strategic and commercial research, at LIMRA. Scott may be contacted at scott.kallenbach@innfeedback.com.


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InsuranceNewsNet Magazine - November 2020  

Ready Or Not: The year that pushed advisors into tech • The Millionaire Mindset • Why The Annuity Tide May Be Turning

InsuranceNewsNet Magazine - November 2020  

Ready Or Not: The year that pushed advisors into tech • The Millionaire Mindset • Why The Annuity Tide May Be Turning

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